Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 100± 430K
2: EX-10.V Material Contract 3± 12K
3: EX-10.W Material Contract 2 15K
4: EX-11 Statement re: Computation of Earnings Per Share 2 11K
5: EX-12 Statement re: Computation of Ratios 2± 9K
6: EX-21 Subsidiaries of the Registrant 1 7K
7: EX-23 Consent of Experts or Counsel 1 8K
8: EX-24 Power of Attorney 2 8K
9: EX-27 Financial Data Schedule (Pre-XBRL) 2± 9K
SECTIONS
Business 2
Properties 12
Legal Proceedings 12
Submission of Matters to a Vote of Security Holders 14
Market for Stock 14
Selected Financial Data 15
Management's Discussion 15
Financial Statements 15
Disagreements 15
Directors and Executive Officers 16
Executive Compensation 17
Security Ownership 17
Certain Relationships 17
Exhibits, Financial Statement Schedules 17
Signatures 22
Differences Letter F-42
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, 1996 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 New York Stock Exchange
$0.32 per share Boston Stock Exchange
There were 1,640,183,273 shares of common stock with a par value of
$0.32 outstanding at March 2, 1997. These shares, which constitute all of the
voting stock of the registrant, had an aggregate market value on March 3, 1997,
of $170.6 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 23, 1997, 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 47 of the 1996 Annual
Report to Share Owners of General Electric Company. The financial section of
such Annual Report to Share Owners (pages 27 through 66 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 1996 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 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, consumer savings and insurance services, 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 has been substantially
complete since mid-1995. Kidder, Peabody financial results have been classified
as discontinued operations in the 1996 Annual Report to Share Owners and
throughout this report.
3
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 GE Capital Services engages are subject to
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 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 37 of the 1996 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 35-39 of the 1996 Annual Report to
Share Owners. Further details can be found in note 28 (pages 62 and 63 of that
Report) to the consolidated financial statements. These data and 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 (8.0%, 8.7% and 9.5% of consolidated revenues in
1996, 1995 and 1994, respectively) produces, sells and services jet engines,
turboprop and turboshaft 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 by CFMI, a company jointly owned by
4
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. Maintenance and repair services are provided for many models
of engines, including engines manufactured by competitors. In 1996, the Company
further expanded its services operations through the acquisition of Celma, an
engine overhaul operation in Brazil.
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.
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 guarantees (principally
guarantees) amounting to $1.5 billion at year-end 1996, and had entered into
commitments totaling $1.6 billion to provide financial assistance on future
aircraft engine sales. Estimated fair values of the aircraft securing these
receivables and associated guarantees exceeded the related account balances or
guaranteed amounts at December 31, 1996.
For current information about Aircraft Engines orders and backlog,
see page 35 of the 1996 Annual Report to Share Owners.
APPLIANCES
Appliances (8.1%, 8.5% and 9.9% of consolidated revenues in 1996,
1995 and 1994, 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 and
others. 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 replacement of
installed units. Such sales are through a variety of retail outlets. The other
principal channel 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 1996, the business acquired a
73% interest in DAKO S.A., Brazil's leading gas range manufacturer.
5
Demand for appliances is 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. For example, the Six Sigma quality initiative will reduce waste, improve
the quality of the product, and enable the business to provide better service.
The business has also worked closely with its supplier network to reduce
material costs. In 1996, the business broadened its high-end product offering
with the introduction of the GE Monogram Collection(trademark), a group of
professional-style, stainless steel appliances. A number of innovative products
were also added to the GE Profile line, including the 24-cubic-foot "Built in
Style" refrigerator and the GE Profile 4300 Series dishwasher.
BROADCASTING
Broadcasting (6.6% of consolidated revenues in 1996, 5.6% in 1995
and 1994) 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 seven 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, 1996, NBC owned and operated 11 VHF and UHF television stations located in
Chicago; Los Angeles; Miami; New York; Philadelphia; San Diego; Washington,
D.C.; Birmingham, Ala.; Columbus, Ohio; Providence, R.I.; Raleigh-Durham, N.C.
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, NBC Super Channel, 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 1996, NBC and Microsoft
Corporation entered into a joint venture that provides information to users
through two separate but related sources: MSNBC Cable, a 24-hour news and
information cable channel; and MSNBC Interactive, a comprehensive interactive
on-line news and information service. NBC contributed the assets of America's
Talking and NBC Desktop to the joint ventures. In 1995, NBC launched NBC Digital
Publishing, which publishes CD-ROMs, and NBC Online Ventures, which establishes
news, sports and entertainment sites on the World Wide Web and Microsoft
Network. In 1995, 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.
INDUSTRIAL PRODUCTS AND SYSTEMS
Industrial Products and Systems (13.1%, 14.6% and 15.6% of
consolidated revenues in 1996, 1995 and 1994, respectively) encompasses lighting
products, electrical distribution and control equipment, transportation systems,
motors and industrial systems, 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, 1996.
Customers for many of these products and services include electrical
distributors, original equipment manufacturers and industrial end users.
6
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 1996, the business acquired the remaining interest in
GE Apar Lighting Private Ltd., in India, increased its ownership interest in GE
Jiabao Lighting Co., Inc., a 1994 joint venture in China, and acquired PT Sinar
Baru Electric in Indonesia. Previously in 1995, the Lighting business had
acquired from its partner the remaining interest in P.T. GE Angkasa Lighting.
Lighting purchased Focos S.A. in Mexico and Lindner Licht GmbH in Germany in
1994. Customers for lighting products are extremely diverse, 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 circuit breakers, transformers, electricity meters,
relays, capacitors and arresters sold for installation in commercial, industrial
and residential facilities. In 1995, to bolster European sales and global
competitiveness, Electrical Distribution and Control (ED&C) acquired 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 and
control equipment, motorized wheels for off-highway vehicles such as those used
in mining operations, motors for drilling devices and parts and service for the
foregoing. Locomotives are sold worldwide, principally to railroads, while
customers for other products include state and urban transit authorities and
industrial users. In 1995, the business formed a joint venture with Harris
Corporation, GE-Harris Railway Electronics, L.L.C., 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 800 of the 4,400 horsepower AC units are now in
service on three railroads. A new 6,000 horsepower AC unit has been developed
and several pre-production units were provided to customers for testing during
1996. For further information about Transportation Systems orders and backlog,
see page 36 of the 1996 Annual Report to Share Owners.
Motors and Industrial Systems includes electric motors and related
products, engineering 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. Engineering 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.
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.
7
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. Demand is 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 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. Demand for these products
is price competitive, putting emphasis on economies of scale and manufacturing
technology. Other market factors include energy-driven technological changes and
the cyclical nature of consumer demand. Competition in industrial automation is
intense and comes from a number of U.S. and international sources.
MATERIALS
Materials (8.2%, 9.5% and 9.5% of consolidated revenues in 1996,
1995 and 1994, 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 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. In 1996, the business completed the first stage
of its new polycarbonate manufacturing facility in Spain. The plant, which is
scheduled to be completed in 1998, will add capacity of 130,000 tons per year.
In the United States, the business added capacity of 50,000 tons of
polycarbonate per year at its Burkeville, Alabama site.
The materials 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.
POWER GENERATION
Power Generation (9.2%, 9.3% and 9.9% of consolidated revenues in
1996, 1995 and 1994, 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 1996 Annual Report to Share Owners. Gas
turbines are used principally in power plants for generation of electricity and
for industrial cogeneration and mechanical drive applications. Centrifugal
compressors are sold for application in gas reinjection, pipeline services and
such process applications as refineries and ammonia plants. In 1994, the
8
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. 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. Nuclear
reactors and fuel and support services for both new and installed boiling water
reactors are also a part of this segment. There have been no nuclear power plant
orders in the United States since the mid-1970s. The business is currently
participating in the construction of nuclear power plants in Japan and Taiwan.
The business continues to invest in advanced technology development and to focus
its resources on refueling and servicing its installed boiling-water reactors.
As discussed in the previous paragraph, there is intense worldwide
competition for power generation products and services. Demand for most power
generation products and services is worldwide and as a result is sensitive to
the economic and political environment of each country in which the business
participates. In the United States, demand for power generation equipment is
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
demand.
TECHNICAL PRODUCTS AND SERVICES
Technical Products and Services (5.9%, 6.3% and 7.1% of consolidated
revenues in 1996, 1995 and 1994, 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 1996, the range of services provided under the
agreement was expanded to include biomedical equipment service.
Business-to-business electronic commerce solutions are provided to
over 40,000 trading partners around the world by GE Information Services (GEIS).
Its global networked based solutions include Electronic Data Interchange and
messaging services, Internet, intranet and systems integration services, and a
line of applications that help customers to lower their costs, reduce cycle
times, and improve 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.
Serving a range 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. Technological competence and innovation, excellence in
design, high product performance, quality of service and competitive pricing are
among the key factors affecting competition 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 1996 Annual Report to Share Owners for information about orders
and backlog of GE Medical Systems' products.
9
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 1996, 1995 and 1994) mainly involve
licensing the use of GE technology 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 (30.0%, 27.2% and 24.8% of
consolidated revenues in 1996, 1995 and 1994, respectively) includes the
financing and consumer savings and insurance operations of GE Capital; Specialty
Insurance (11.3%, 10.6% and 8.2% of consolidated revenues in 1996, 1995 and
1994, respectively) consists of the activities of GIH as well as the activities
of other insurance entities discussed on page 63 of the 1996 Annual Report to
Share Owners; and All Other represents GECS corporate activities not
identifiable with specific industry segments.
Additional information follows.
Financing activities of GE Capital are summarized below. Very little
of the financing provided by GE Capital involves products that are manufactured
by GE.
o 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 consumer savings
and insurance services.
o 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.
o EQUIPMENT MANAGEMENT -- leases, loans, and asset management
services, including sales, for portfolios of commercial and transportation
equipment, including aircraft, trailers, auto fleets, modular space units,
railroad rolling stock, data processing equipment, containers used on
ocean-going vessels, and satellites.
o 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.
GE Capital continues to experience broad growth from both internal
sources and through acquisitions. In 1996, GE Capital's equipment management
operations acquired Ameridata Technologies Inc., an international provider of
distributed computer products and services as well as business and technology
consulting services, and CompuNet Computer AG, a provider of distributed
computing and communications technologies based in Germany. Also in 1996, GE
Capital's consumer services operations acquired the Life Insurance Company of
10
Virginia and First Colony Corporation, further expanding and enhancing its
offerings of life insurance and annuity products. In 1995, consumer services
acquired 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,
consumer services established operations in 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 Corporation, which
provides financing to Northern Telecom's customers and dealers.
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 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 1996,
1995 and 1994, respectively, were 1.53, 1.51 and 1.63, 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 GIH which, together with its
affiliates, writes substantially all lines of reinsurance, and other insurance
activities of GE Capital. ERC, GIH's principal affiliate, together with its
subsidiaries, reinsures property and casualty risks written by more than 1,000
insurers around the world, and also writes certain specialty lines of insurance
on a direct basis, principally excess workers' compensation for self-insurers,
errors and omissions coverage for insurance and real estate agents and brokers,
excess indemnity for self-insurers of medical benefits, and libel and allied
torts. Other property and casualty affiliates write excess and surplus lines
insurance, and provide reinsurance brokerage services. GIH also is engaged in
the reinsurance of traditional life insurance products, including term, whole
and universal life, annuities, group long term health products and the provision
of financial reinsurance to life insurers. In 1995, GIH, through its ERC
affiliate, acquired a majority of two German reinsurance businesses, Frankona
Reinsurance Group and Aachen Reinsurance Group, both located in Germany. These
businesses together with other ERC affiliates located in Denmark and the United
Kingdom write property and casualty and life reinsurance, principally in Europe
and elsewhere throughout the world. 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. GIH and certain U.S. affiliates are 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
11
insurance for international retail borrowers and, for GE Capital customers,
credit life and certain types of property and casualty insurance. In 1996, GE
Capital acquired Union Fidelity Life Insurance Company, a leader in partnership
marketing of domestic life and health insurance products. 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 29 to consolidated
financial statements on page 64 of the 1996 Annual Report to Share Owners.
Additional financial data about GE's exports from the U.S. and total
international operations are on page 40 of the 1996 Annual Report to Share
Owners.
ORDERS BACKLOG
See pages 35, 36 and 44 of the 1996 Annual Report to Share Owners
for information about GE's backlog of unfilled orders.
RESEARCH AND DEVELOPMENT
Total expenditures for research and development were $1,886 million
in 1996. Total expenditures had been $1,892 million in 1995 and $1,741 million
in 1994. Of these amounts, $1,421 million in 1996 was GE-funded ($1,299 million
in 1995 and $1,176 million in 1994); and $465 million in 1996 was funded by
customers ($593 million in 1995 and $565 million in 1994), principally the U.S.
government. Aircraft Engines accounts for the largest share of GE's research and
development expenditures from both Company and customer funds. Other significant
expenditures of Company and customer research and development funds were made by
Medical Systems, Power Systems, and Plastics.
Approximately 7,700 person-years of scientist and engineering effort
were devoted to research and development activities in 1996, with about 82% of
the time involved primarily in GE-funded activities.
ENVIRONMENTAL MATTERS
See pages 44 and 58 of GE's 1996 Annual Report to Share Owners for
a discussion of environmental matters.
EMPLOYEE RELATIONS
At year-end 1996, General Electric Company and consolidated
affiliates employed 239,000 persons, of whom approximately 155,000 were in the
United States. For further information about employees, see page 45 of the 1996
Annual Report to Share Owners.
Approximately 38,500 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
12
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.
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 1996 (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 1996
(3% of GE revenues) were defense-related sales of aircraft engine goods and
services. In 1995, about 3% of consolidated revenues (4% of GE revenues) were
from sales of goods and services to agencies of the U.S. government. About 2% of
consolidated revenues in 1995 (3% of GE revenues) were defense-related sales of
aircraft engine goods and services. In 1994, about 4% of consolidated revenues
(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.
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 124 manufacturing plants located in 25 other countries.
ITEM 3. LEGAL PROCEEDINGS
GENERAL
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 former 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 stockholders
of Martin Marietta Corporation. 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 primarily 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
13
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. 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. On September
26, 1996, the District Court granted defendants' motion to dismiss those claims
which were based on allegations that the transfer of plan assets was unlawful,
and ordered discovery on the remaining claims.
As previously reported, the directors (other than Messrs. Calloway,
Gonzalez, Nunn, 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, 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 $350 million, was filed on May 10, 1994, by the Teachers'
Retirement System of Louisiana against the Company, its directors (other than
Messrs. Dammerman, Nunn, 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. Both suits
were consolidated in an amended complaint filed on March 6, 1995. 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. On April 16, 1996, the court dismissed the amended consolidated
complaint for failure to make a pre-litigation demand, and that decision has
been appealed. 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, which affirmed the lower court decision.
14
The directors, other than Mr. Nunn, are 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 is 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, 3,000 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 3,000 shares of
GE stock from the Company at the market price of GE stock on the date of grant.
The suit claims 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
claims 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 seeks 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. The Company thus believes the claims are without merit and is defending
the suit.
ENVIRONMENTAL
As previously reported, in April 1996, the Environmental Protection
Agency filed an action and stated that it was seeking $300,000 in penalties for
the Company's failure to adequately respond to an Agency information request in
1994. In December, 1996, the Company settled the matter for $95,000.
As previously reported, 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 at the Company's New
Orleans, Louisiana facility. In January, 1997, the Company settled the matter
for a $70,000 Supplemental Environmental Project.
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 pages
44 and 58 of GE's 1996 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:
15
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Common stock market price
---------------------------------------------------------------------------
Dividends
(In dollars) High Low declared
---------------------------------------------------------------------------
1996
Fourth quarter $106 1/8 $90 1/2 $.52
Third quarter 92 77 7/8 .46
Second quarter 88 1/8 74 1/8 .46
First quarter 80 1/2 69 1/2 .46
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
---------------------------------------------------------------------------
As of December 31, 1996, there were about 493,000 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; effect of accounting change; net earnings; net earnings per share;
dividends declared; dividends declared per share; long-term borrowings; and
total assets of continuing operations appearing on page 45 of the Annual Report
to Share Owners for the fiscal year ended December 31, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reported on pages 34-36 and 38-44 (and graphs on pages 27, 34, 35,
38, 39, 40, 41, 42, 43 and 44) of the Annual Report to Share Owners for the
fiscal year ended December 31, 1996.
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.
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Executive Officers of the Registrant (As of March 21, 1997)
[Enlarge/Download Table]
Date assumed
Executive Officer
Name Position Age position
--------------------------------------------------------------------------------------------------------------
John F. Welch, Jr. Chairman of the Board and Chief
Executive Officer 61 April 1981
Philip D. Ameen Vice President and Comptroller 48 April 1994
James R. Bunt Vice President and Treasurer 55 January 1993
David L. Calhoun Vice President, GE Transportation Systems 39 June 1995
William J. Conaty Senior Vice President, Human Resources 51 October 1993
David M. Cote Senior Vice President, GE Appliances 44 June 1996
Dennis D. Dammerman Senior Vice President, Finance, and
Chief Financial Officer 51 March 1984
Lewis S. Edelheit Senior Vice President, Research and
Development 54 November 1992
Paolo Fresco Vice Chairman of the Board and Executive
Officer 63 October 1987
Benjamin W. Heineman, Jr. Senior Vice President, General Counsel
and Secretary 53 September 1987
Jeffrey R. Immelt Senior Vice President, GE Medical Systems 41 January 1997
William J. Lansing Vice President, Business Development 38 October 1996
W. James McNerney, Jr. Senior Vice President, GE Lighting 47 January 1992
Eugene F. Murphy Senior Vice President, GE Aircraft Engines 61 October 1986
Robert L. Nardelli Senior Vice President, GE Power Systems 48 February 1992
Robert W. Nelson Vice President, Financial Planning
and Analysis 56 September 1991
John D. Opie Vice Chairman of the Board and Executive
Officer 59 August 1986
Gary M. Reiner Senior Vice President, Chief Information
Officer 42 January 1991
Gary L. Rogers Senior Vice President, GE Plastics 52 December 1989
James W. Rogers Vice President, GE Motors and
Industrial Systems 46 May 1991
Lloyd G. Trotter Vice President, GE Electrical Distribution
and Control 51 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.
All Executive Officers have been executives of GE for the last five
years except Lewis S. Edelheit and William J. Lansing. 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. Mr. Lansing
17
joined GE from Prodigy, Inc., where he was Chief Operating Officer. Prior to
joining Prodigy in January of 1996, he had been with McKinsey & Company for nine
years, most recently as a partner in the Stamford, Conn., office where his
experience encompassed a variety of industries with a particular concentration
in communications and technology. He also has practiced securities law at Davis
Polk & Wardwell.
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 23, 1997.
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 23, 1997.
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 23, 1997.
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 23, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial statements applicable to General Electric Company and
consolidated affiliates are contained on the page(s) indicated
in the GE Annual Report to Share Owners for the fiscal year
ended December 31, 1996.
18
[Download Table]
Annual 10-K
Report Report
Page(s) Page(s)
------- -------
Statement of earnings for the years
ended December 31, 1996, 1995 and 1994 28 F-2
Statement of financial position at
December 31, 1996 and 1995 30 F-4
Statement of cash flows for the years
ended December 31, 1996, 1995 and 1994 32 F-6
Independent Auditors' Report 46 F-20
Other financial information:
Notes to consolidated financial
statements 47-66 F-21 to F-40
Industry segment information 35-37 F-9 to F-11
62-63 F-36 to F-37
Geographic segment information 64 F-38
Operations by quarter (unaudited) 66 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.
(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.)
19
(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.)
(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.)
20
(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.)
(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 1996 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 24, 1996.)
(u) General Electric 1995 Executive Deferred Salary
Plan. (Incorporated by reference to Exhibit 10(t)
to General Electric Annual Report on Form 10-K
(Commission file number 1-35) for the fiscal year
ended December 31, 1995.)
(v) General Electric 1996 Executive Deferred Salary
Plan.*
(w) Employee and Post-Retirement Consulting Agreement
Between General Electric Company and John F.
Welch, Jr.*
(11) Statement re Compilation of Per Share Earnings.*
(12) Computation of Ratio of Earnings to Fixed Charges.*
(21) Subsidiaries of Registrant.*
21
(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, 33-35922, 33-44593, 33-39596, 33-39596-01,
33-47085, 33-50639, 33-61029, 33-61029-01), on Form S-4
(Registration No. 333-01947) and on Form S-8
(Registration Nos. 33-2-84145, 33-35922, 33-47500,
33-49053, and 333-01953).*
(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, 1996.
Form 8-K Current Report (Item 5) dated December 20, 1996,
announced that on December 19, 1996, GE's Board of Directors
voted to increase the Company's quarterly dividend, and to
increase and extend its share repurchase program. The Board also
recommended a two-for-one split of GE stock, a proposal that
will be voted upon at the 1997 Annual Meeting of Share Owners to
be held on April 23, 1997.
22
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, 1996, 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 21st day of March 1997.
General Electric Company
(Registrant)
By Dennis D. Dammerman
Senior Vice President-Finance
(Principal Financial Officer)
23
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 21, 1997
Officer
Philip D. Ameen
Vice President and Comptroller Principal Accounting March 21, 1997
Officer
John F. Welch, Jr.* Chairman of the Board of Directors
(Principal Executive Officer)
D. Wayne Calloway* Director
Dennis D. Dammerman* Director
Paolo Fresco* Director
Robert E. Mercer* Director
Sam Nunn* Director
John D. Opie* Director
Roger S. Penske* Director
Barbara Scott Preiskel* Director
Douglas A. Warner III* Director
A majority of the Board of Directors
*By Benjamin W. Heineman, Jr.
Attorney-in-fact
March 21, 1997
F-1
(ANNUAL REPORT PAGES)
ANNUAL REPORT PAGE 27
================================================================================
FINANCIAL SECTION
CONTENTS
46 INDEPENDENT AUDITORS' REPORT
AUDITED FINANCIAL STATEMENTS
28 Earnings
30 Financial Position
32 Cash Flows
47 Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION
34 Operations
34 Consolidated Operations
34 GE Operations
35 Industry Segments
38 GECS Continuing Operations
40 International Operations
41 Financial Resources and Liquidity
44 Selected Financial Data
46 Financial Responsibility
[CHART HERE]
CONSOLIDATED REVENUES
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$53.051 $55.701 $60.109 $70.028 $79.179
-----------------------------------------------------------------------------
[CHART HERE]
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
BEFORE ACCOUNTING CHANGE
-----------------------------------------------------------------------------
(In dollars) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$2.41 $2.45 $3.46 $3.90 $4.40
-----------------------------------------------------------------------------
[CHART HERE]
DIVIDENDS PER SHARE
-----------------------------------------------------------------------------
(In dollars) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$1.16 $1.305 $1.49 $1.69 $1.90
-----------------------------------------------------------------------------
F-2
ANNUAL REPORT PAGE 28
================================================================================
STATEMENT OF EARNINGS
[Enlarge/Download Table]
General Electric Company
and consolidated affiliates
--------------------------------
For the years ended December 31 (In millions) 1996 1995 1994
----------------------------------------------------------------- ---------------------------------
REVENUES
Sales of goods $ 34,180 $ 33,157 $ 30,740
Sales of services 11,791 9,733 8,803
Other income (note 3) 638 752 793
Earnings of GECS from continuing operations -- -- --
GECS revenues from operations (note 4) 32,570 26,386 19,773
-------- -------- -------
Total revenues 79,179 70,028 60,109
-------- -------- -------
COSTS AND EXPENSES (note 5)
Cost of goods sold 24,578 24,288 22,748
Cost of services sold 8,293 6,682 6,214
Interest and other financial charges 7,904 7,286 4,949
Insurance losses and policyholder and annuity benefits 6,678 5,285 3,507
Provision for losses on financing receivables (note 8) 1,033 1,117 873
Other costs and expenses 19,618 15,429 12,987
Minority interest in net earnings of consolidated
affiliates 269 204 170
-------- -------- -------
Total costs and expenses 68,373 60,291 51,448
-------- -------- -------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 10,806 9,737 8,661
Provision for income taxes (note 9) (3,526) (3,164) (2,746)
-------- -------- -------
EARNINGS FROM CONTINUING OPERATIONS 7,280 6,573 5,915
LOSS FROM DISCONTINUED OPERATIONS (NOTE 2) -- -- (1,189)
-------- -------- -------
NET EARNINGS $ 7,280 $ 6,573 $ 4,726
======== ======== ========
----------------------------------------------------------------- ---------------------------------
NET EARNINGS PER SHARE (in dollars)
Continuing operations $ 4.40 $ 3.90 $ 3.46
Discontinued operations -- -- (0.69)
-------- -------- -------
Net earnings per share $ 4.40 $ 3.90 $ 2.77
======== ======== ========
----------------------------------------------------------------- ---------------------------------
DIVIDENDS DECLARED PER SHARE (in dollars) $ 1.90 $ 1.69 $ 1.49
-------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this statement.
F-3
ANNUAL REPORT PAGE 29
STATEMENT OF EARNINGS (CONTINUED)
[Enlarge/Download Table]
GE GECS
---------------------------------- --------------------------------
For the years ended December 31 (In millions) 1996 1995 1994 1996 1995 1994
------------------------------------------------------ ---------------------------------- -------------------------------
REVENUES
Sales of goods $ 34,196 $ 33,177 $ 30,767 $ -- $ -- $ --
Sales of services 11,923 9,836 8,863 -- -- --
Other income (note 3) 629 753 783 -- -- --
Earnings of GECS from continuing operations 2,817 2,415 2,085 -- -- --
GECS revenues from operations (note 4) -- -- -- 32,713 26,492 19,875
-------- -------- -------- -------- -------- --------
Total revenues 49,565 46,181 42,498 32,713 26,492 19,875
-------- -------- -------- -------- -------- --------
COSTS AND EXPENSES (note 5)
Cost of goods sold 24,594 24,308 22,775 -- -- --
Cost of services sold 8,425 6,785 6,274 -- -- --
Interest and other financial charges 595 649 410 7,326 6,661 4,545
Insurance losses and policyholder and annuity benefits -- -- -- 6,678 5,285 3,507
Provision for losses on financing receivables (note 8) -- -- -- 1,033 1,117 873
Other costs and expenses 6,274 5,743 5,211 13,461 9,769 7,862
Minority interest in net earnings of consolidated
affiliates 102 64 31 167 140 139
-------- -------- -------- -------- -------- --------
Total costs and expenses 39,990 37,549 34,701 28,665 22,972 16,926
-------- -------- -------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 9,575 8,632 7,797 4,048 3,520 2,949
Provision for income taxes (note 9) (2,295) (2,059) (1,882) (1,231) (1,105) (864)
-------- -------- -------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS 7,280 6,573 5,915 2,817 2,415 2,085
LOSS FROM DISCONTINUED OPERATIONS (NOTE 2) -- -- (1,189) -- -- (1,189)
-------- -------- -------- -------- -------- --------
NET EARNINGS $ 7,280 $ 6,573 $ 4,726 $ 2,817 $ 2,415 $ 896
======== ======== ======== ======== ======== ========
--------------------------------------------------------------------------------------------------------------------------------
<FN>
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-4
ANNUAL REPORT PAGE 30
================================================================================
STATEMENT OF FINANCIAL POSITION
[Enlarge/Download Table]
General Electric Company
and consolidated affiliates
---------------------------
At December 31 (In millions) 1996 1995
----------------------------------------------------------------------- ---------------------------
ASSETS
Cash and equivalents $ 4,191 $ 2,823
Investment securities (note 10) 59,889 41,067
Current receivables (note 11) 8,704 8,735
Inventories (note 12) 4,473 4,395
Financing receivables (investment in time sales, loans and
financing leases)-- net (notes 8 and 13) 99,714 93,272
Other GECS receivables (note 14) 15,418 12,417
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 28,795 25,679
Investment in GECS -- --
Intangible assets (note 16) 16,007 11,654
All other assets (note 17) 35,211 27,993
--------- ---------
TOTAL ASSETS $ 272,402 $ 228,035
========= =========
----------------------------------------------------------------------- ---------------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 80,200 $ 64,463
Accounts payable, principally trade accounts 10,205 9,061
Progress collections and price adjustments accrued 2,161 1,812
Dividends payable 855 767
All other GE current costs and expenses accrued (note 18) 7,086 5,898
Long-term borrowings (note 19) 49,246 51,027
Insurance liabilities, reserves and annuity benefits (note 20) 61,327 39,699
All other liabilities (note 21) 18,917 15,033
Deferred income taxes (note 22) 8,273 7,710
--------- ---------
Total liabilities 238,270 195,470
--------- ---------
Minority interest in equity of consolidated affiliates (note 23) 3,007 2,956
--------- ---------
Common stock (1,857,013,000 shares issued) 594 594
Unrealized gains on investment securities-- net 671 1,000
Other capital 2,498 1,663
Retained earnings 38,670 34,528
Less common stock held in treasury (11,308) (8,176)
--------- ---------
Total share owners' equity (notes 25 and 26) 31,125 29,609
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 272,402 $ 228,035
========= =========
----------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this statement.
F-5
ANNUAL REPORT PAGE 31
STATEMENT OF FINANCIAL POSITION (CONTINUED)
[Enlarge/Download Table]
GE GECS
--------------------- -------------------
At December 31 (In millions) 1996 1995 1996 1995
--------------------------------------------------------------- --------------------- -------------------
ASSETS
Cash and equivalents $ 957 $ 874 $ 3,234 $ 1,949
Investment securities (note 10) 17 4 59,872 41,063
Current receivables (note 11) 8,826 8,891 -- --
Inventories (note 12) 4,473 4,395 -- --
Financing receivables (investment in time sales, loans and
financing leases)-- net (notes 8 and 13) -- -- 99,714 93,272
Other GECS receivables (note 14) -- -- 15,962 12,897
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 10,832 10,234 17,963 15,445
Investment in GECS 14,276 12,774 -- --
Intangible assets (note 16) 7,367 6,643 8,640 5,011
All other assets (note 17) 13,177 11,901 22,034 16,092
-------- -------- -------- --------
TOTAL ASSETS $ 59,925 $ 55,716 $227,419 $185,729
======== ======== ======== ========
--------------------------------------------------------------- --------------------- -------------------
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 2,339 $ 1,666 $ 77,945 $ 62,808
Accounts payable, principally trade accounts 4,195 3,968 6,787 5,952
Progress collections and price adjustments accrued 2,161 1,812 -- --
Dividends payable 855 767 -- --
All other GE current costs and expenses accrued (note 18) 6,870 5,747 -- --
Long-term borrowings (note 19) 1,710 2,277 47,676 48,790
Insurance liabilities, reserves and annuity benefits (note 20) -- -- 61,327 39,699
All other liabilities (note 21) 9,660 8,928 9,138 5,982
Deferred income taxes (note 22) 533 508 7,740 7,202
-------- -------- -------- --------
Total liabilities 28,323 25,673 210,613 170,433
-------- -------- -------- --------
Minority interest in equity of consolidated affiliates (note 23) 477 434 2,530 2,522
-------- -------- -------- --------
Common stock (1,857,013,000 shares issued) 594 594 1 1
Unrealized gains on investment securities-- net 671 1,000 668 989
Other capital 2,498 1,663 2,253 2,266
Retained earnings 38,670 34,528 11,354 9,518
Less common stock held in treasury (11,308) (8,176) -- --
-------- -------- -------- --------
Total share owners' equity (notes 25 and 26) 31,125 29,609 14,276 12,774
-------- -------- -------- --------
TOTAL LIABILITIES AND EQUITY $ 59,925 $ 55,716 $227,419 $185,729
======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------
<FN>
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-6
ANNUAL REPORT PAGE 32
================================================================================
STATEMENT OF CASH FLOWS
[Enlarge/Download Table]
General Electric Company
and consolidated affiliates
--------------------------------
For the years ended December 31 (In millions) 1996 1995 1994
--------------------------------------------------------------- --------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 7,280 $ 6,573 $ 4,726
Adjustments for discontinued operations -- -- 1,189
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation and amortization 3,785 3,594 3,207
Earnings retained by GECS-- continuing operations -- -- --
Deferred income taxes 1,145 1,047 1,228
Decrease (increase) in GE current receivables 118 (632) 668
Decrease (increase) in GE inventories (76) 55 (56)
Increase (decrease) in accounts payable 641 244 697
Increase in insurance liabilities, reserves and annuity benefits 1,491 2,490 1,624
Provision for losses on financing receivables 1,033 1,117 873
All other operating activities 2,434 458 (2,399)
-------- -------- --------
CASH FROM OPERATING ACTIVITIES 17,851 14,946 11,757
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,760) (6,447) (7,492)
Dispositions of property, plant and equipment 1,363 1,542 2,506
Net increase in GECS financing receivables (2,278) (11,309) (9,525)
Payments for principal businesses purchased (5,516) (5,641) (2,606)
All other investing activities (6,021) (3,362) 372
-------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (20,212) (25,217) (16,745)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) 11,827 (3,487) (2,784)
Newly issued debt (maturities longer than 90 days) 23,153 37,604 23,239
Repayments and other reductions (maturities longer than 90 days) (25,906) (18,580) (13,098)
Net purchase of GE shares for treasury (2,323) (2,523) (353)
Dividends paid to share owners (3,050) (2,770) (2,462)
All other financing activities 28 259 181
-------- -------- --------
CASH FROM (USED FOR) FINANCING ACTIVITIES 3,729 10,503 4,723
-------- -------- --------
CASH USED FOR DISCONTINUED OPERATIONS -- -- (200)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 1,368 232 (465)
Cash and equivalents at beginning of year 2,823 2,591 3,056
-------- -------- --------
Cash and equivalents at end of year $ 4,191 $ 2,823 $ 2,591
======== ======== ========
--------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (7,874) $ (6,645) $ (4,524)
Cash recovered (paid) during the year for income taxes (1,392) (1,483) (1,777)
--------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 47-66 are an integral part of this statement.
F-7
ANNUAL REPORT PAGE 33
STATEMENT OF CASH FLOWS (CONTINUED)
[Enlarge/Download Table]
GE GECS
-------------------------------- --------------------------------
For the years ended December 31 (In millions) 1996 1995 1994 1996 1995 1994
------------------------------------------------------- -------------------------------- --------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 7,280 $ 6,573 $ 4,726 $ 2,817 $ 2,415 $ 896
Adjustments for discontinued operations -- -- 1,189 -- -- 1,189
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation, depletion and amortization 1,635 1,581 1,545 2,150 2,013 1,662
Earnings retained by GECS-- continuing operations (1,836) (1,324) (1,181) -- -- --
Deferred income taxes 68 369 575 1,077 678 653
Decrease (increase) in GE current receivables 152 (739) 754 -- -- --
Decrease (increase) in GE inventories (76) 55 (56) -- -- --
Increase (decrease) in accounts payable 197 462 810 318 418 (222)
Increase in insurance liabilities, reserves
and annuity benefits -- -- -- 1,491 2,490 1,624
Provision for losses on financing receivables -- -- -- 1,033 1,117 873
All other operating activities 1,647 (912) (2,291) 881 946 140
-------- -------- -------- -------- -------- --------
CASH FROM OPERATING ACTIVITIES 9,067 6,065 6,071 9,767 10,077 6,815
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,389) (1,831) (1,743) (5,371) (4,616) (5,749)
Dispositions of property, plant and equipment 30 38 86 1,333 1,504 2,420
Net increase in GECS financing receivables -- -- -- (2,278) (11,309) (9,525)
Payments for principal businesses purchased (1,122) (238) (575) (4,394) (5,403) (2,031)
All other investing activities (106) 408 14 (6,090) (3,913) 176
-------- -------- -------- -------- -------- --------
CASH USED FOR INVESTING ACTIVITIES (3,587) (1,623) (2,218) (16,800) (23,737) (14,709)
-------- -------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) 974 1,061 (566) 11,026 (4,510) (2,261)
Newly issued debt (maturities longer than 90 days) 252 826 766 22,901 36,778 22,473
Repayments and other reductions (maturities
longer than 90 days) (1,250) (1,535) (1,399) (24,656) (17,045) (11,699)
Net purchase of GE shares for treasury (2,323) (2,523) (353) -- -- --
Dividends paid to share owners (3,050) (2,770) (2,462) (981) (1,091) (904)
All other financing activities -- -- (2) 28 259 183
-------- -------- -------- -------- -------- --------
CASH FROM (USED FOR) FINANCING ACTIVITIES (5,397) (4,941) (4,016) 8,318 14,391 7,792
-------- -------- -------- -------- -------- --------
CASH USED FOR DISCONTINUED OPERATIONS -- -- -- -- -- (200)
-------- -------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 83 (499) (163) 1,285 731 (302)
Cash and equivalents at beginning of year 874 1,373 1,536 1,949 1,218 1,520
-------- -------- -------- -------- -------- --------
Cash and equivalents at end of year $ 957 $ 874 $ 1,373 $ 3,234 $ 1,949 $ 1,218
======== ======== ======== ======== ======== ========
-------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (411) $ (468) $ (374) $ (7,463) $ (6,177) $ (4,150)
Cash recovered (paid) during the year for income taxes (1,286) (1,651) (1,456) (106) 168 (321)
-------------------------------------------------------------------------------------------------------------------------------
<FN>
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 32.
F-8
ANNUAL REPORT PAGE 34
================================================================================
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 Operations, GECS Continuing Operations and
International Operations.
CONSOLIDATED OPERATIONS
GE achieved record revenues, earnings, operating margin and cash flow from
operating activities in 1996. The year's performance again demonstrates the
ability of GE's diverse mix of leading global businesses to deliver strong
financial results.
Revenues, including acquisitions, rose to a record $79.2 billion in 1996, up
13% from 1995. This increase was primarily attributable to four factors --
growth at GE Capital Services, increased global activities across GE, higher
sales of services and related spare parts by GE's equipment businesses, and
higher revenues from NBC, including revenues from coverage of the 1996 Summer
Olympic Games. Revenues increased at nine of GE's twelve businesses, led by
double-digit growth at GE Capital Services, NBC and Power Systems. Revenues in
1995 were $70.0 billion, a 17% increase attributable primarily to increased
international activities. In 1995, eleven of GE's twelve businesses increased
revenues, six by double digits.
Earnings per share increased to $4.40 during 1996, up 13% from the prior
year's $3.90. Earnings increased 11% to a record $7.280 billion. In 1995,
earnings per share were $3.90, up 13% from 1994's earnings per share from
continuing operations. For 1995, earnings of $6.573 billion were up 11% from
1994's comparable level. Growth rates in earnings per share exceeded growth
rates in earnings as a result of the ongoing repurchase of shares under the
four-year, $13 billion share repurchase plan initiated in December 1994. Net
earnings in 1994 were $4.726 billion ($2.77 per share) and, as discussed in note
2, included a loss amounting to $1,189 million ($0.69 per share) related to the
GECS discontinued securities broker-dealer.
NEW ACCOUNTING STANDARDS include Statement of Financial Accounting Standards
(SFAS) No. 125, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. Among other things, the new Statement
distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings, based on control of the transferred assets. SFAS No. 125
is effective for transfers of financial assets occurring after December 31,
1996, and its adoption will not have an effect on the financial position or
results of operations of GE or GECS.
DIVIDENDS DECLARED IN 1996 AMOUNTED TO $3.138 BILLION. Per-share dividends of
$1.90 were up 12% from 1995, following a 13% increase from the preceding year.
GE has rewarded its share owners with 21 consecutive years of dividend growth.
The chart below illustrates that GE's dividend growth for the past five years
has significantly outpaced dividend growth of companies in the Standard & Poor's
500 stock index.
RETURN ON AVERAGE SHARE OWNERS' EQUITY reached 24.0% in 1996, up from 23.5% and
18.1% in 1995 and 1994, respectively.
GE OPERATIONS
GE total revenues were $49.6 billion in 1996, compared with $46.2 billion in
1995 and $42.5 billion in 1994.
* GE's sales of goods and services were $46.1 billion in 1996, an increase of
7% from 1995, which in turn was 9% higher than in 1994. The improvement in
1996 was led by NBC, Power Systems and Appliances. Volume was about 9%
higher in 1996, reflecting growth in most businesses during the year. While
overall selling prices were down slightly in 1996, the effects of selling
prices on sales differed markedly among businesses. There also was a minor
negative effect on selling prices arising from effects of currency exchange
rates on the translation of sales denominated in other than U.S. dollars.
Volume in 1995 was about 8% higher than in 1994, while selling prices were
essentially flat. Currency exchange rates contributed modestly to the 1995
sales increase.
[CHART HERE]
GE/S&P DIVIDEND GROWTH SINCE 1991
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
GE 10.42% 23.96% 41.42% 56.70% 73.84%
S&P 500 1.48 3.11 8.03 13.03 22.13
-----------------------------------------------------------------------------
F-9
ANNUAL REPORT PAGE 35
For purposes of the required financial statement display of GE sales
and costs of sales on pages 28 and 29, "goods" refers to tangible products,
and "services" refers to all other sales, including broadcasting and
information services activities. An increasingly important element of GE
sales is sales related to equipment services -- services that include both
spare parts (goods) as well as repair services. Such equipment services
sales amounted to $8.4 billion in 1996 and were up 11% from 1995.
* GE's other income, earned from a wide variety of sources, was $629 million
in 1996, $753 million in 1995 and $783 million in 1994. The decrease in
other income in 1996 was largely attributable to lower royalty payments and
a decrease in income from associated companies. Details of GE's other
income are provided in note 3.
* Earnings of GECS from continuing operations were up 17% in 1996, following
a 16% increase the year before. See page 38 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 1996, GE's
operating margin rose to a record 14.8% of sales, an improvement of 0.4
percentage points from 1995. Nine businesses -- led by Power Systems, NBC,
Appliances, Medical Systems and Aircraft Engines -- reported higher operating
margins. Operating margin was 14.4% of sales in 1995, compared with 13.6% in
1994. The operating margin improvement in 1995 was led by strong increases in
Plastics, Aircraft Engines and NBC.
TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar
basis) has been a major source of recent improvement in GE's operating margin,
accounting for more than $1 billion of such increases in each of the past three
years. The overall productivity rate was 2.9% in 1996, reflecting principally
the positive effects of higher volume on base cost productivity. Three
businesses -- Power Systems, NBC and Aircraft Engines -- reported productivity
rates in excess of 5%. The overall productivity rate was 3.7% in 1995,
reflecting improvements across all GE businesses except Power Systems, which was
adversely affected by lower capacity utilization. Four businesses -- NBC,
Transportation Systems, Aircraft Engines and Information Services -- had
productivity rates in excess of 5%. Productivity performance more than offset
the impact of inflation in each of the last three years.
GE INTEREST AND OTHER FINANCIAL CHARGES in 1996 amounted to $595 million, down
from $649 million in 1995, which was up from $410 million in 1994. The 1996
decrease was primarily attributable to lower interest rates and, to a lesser
extent, a shift in the mix of debt towards short-term borrowings. The 1995
increase resulted from the combination of higher interest rates and a higher
level of average borrowings during the period.
[CHART HERE]
GE OPERATING MARGIN AS A PERCENTAGE OF SALES
(EXCLUDING RESTRUCTURING)
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
11.5% 12.5% 13.6% 14.4% 14.8%
-----------------------------------------------------------------------------
ENTERING 1997 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.
GE INDUSTRY SEGMENT REVENUES AND OPERATING PROFIT for the past five years are
shown in the table on page 37. For additional information, including a
description of the products and services included in each segment, see note 28.
AIRCRAFT ENGINES revenues increased by 3% in 1996 as higher volume in services
and military engines more than offset pricing pressures. Operating profit
increased by 4% in 1996 as a result of improvements in the services business and
productivity in the segment, offset somewhat by reduced selling prices and cost
inflation. Revenues increased 7% in 1995 as a result of higher services volume,
partially offset by the 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 selling prices.
In 1996, $1.8 billion of revenues were from sales to the U.S. government, up
$0.1 billion from 1995, which was $0.1 billion lower than in 1994.
Aircraft Engines received orders of $7.1 billion in 1996, up 20% from $5.9
billion in 1995. The backlog at year-end 1996 was $9.0 billion ($9.1 billion at
the end of 1995). Of the total, $7.7 billion related to products, about 39% of
which was scheduled for delivery in 1997. Services orders are included in
backlog at the end of 1996 for only the succeeding 12 months; such services
backlog was $1.3 billion.
F-10
ANNUAL REPORT PAGE 36
APPLIANCES revenues were 7% higher than a year ago, reflecting industry growth
and U.S. market share gains across all core product lines. Operating profit
increased 8% as a result of productivity and higher volume, which were partially
offset by lower selling prices. Revenues in 1995 were about the same as the
previous year as softening North American sales offset strong growth in Europe
and Asia. Operating profit increased 2% in 1995 despite higher material costs,
primarily as a result of productivity.
BROADCASTING revenues increased 34% in 1996, following a 17% increase in 1995.
The revenue increases in both years reflected a strong advertising market,
excellent prime-time, news and other daypart ratings, strong growth in the
owned-and-operated stations and, in 1996, NBC's broadcast of the Summer Olympic
Games. Operating profit increased 29% in 1996 as the combination of excellent
ratings, sharply higher results in owned-and-operated stations and profitable
Olympics coverage more than offset higher license fees for certain primetime
programs that were renewed. Operating profit was up 48% in 1995 on stronger
advertising revenues.
INDUSTRIAL PRODUCTS AND SYSTEMS revenues rose 2% in 1996, reflecting improved
volume in Lighting, Electrical Distribution and Control, and Motors and
Industrial Systems. Operating profit increased 6% as productivity improvements
across the segment more than offset the effects of cost inflation and lower
selling prices for certain products. Revenue increased 8% in 1995, principally
as a result of higher volume at Transportation Systems, Lighting, and Motors and
Industrial Systems. Operating profit increased 14% in 1995, reflecting
productivity across the segment and improved volume, which more than offset
higher material costs.
Transportation Systems received orders of $2.0 billion in 1996, up $0.4
billion from 1995. The backlog at year-end 1996 was $1.5 billion, about the same
as at the end of 1995. Of the total, $1.4 billion related to products, about 81%
of which was scheduled for shipment in 1997, and the remainder related to 1997
services.
MATERIALS revenues decreased 2% and operating profit was about the same as a
year ago, primarily as a result of lower selling prices. The adverse effects of
selling prices on operating profit were offset in part by reductions in certain
material costs, volume improvements and productivity. Revenues increased 17% in
1995, reflecting higher selling prices and the consolidation of Toshiba
Silicones. Operating profit increased 51% in 1995, primarily because of the
increase in selling prices, productivity and volume growth, the combination of
which more than offset increases in material costs.
POWER GENERATION revenues were 11% higher in 1996, reflecting primarily strong
growth at Nuovo Pignone and higher services volume. Operating profit increased
39% over 1995 as productivity more than offset cost inflation and lower selling
prices. Revenues increased 10% in 1995, principally as a result of the
consolidation of Nuovo Pignone at the beginning of the year. 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.
Power Generation orders were $8.0 billion for 1996, a double-digit increase
over 1995. The backlog of unfilled orders at year-end 1996 was $10.9 billion
($10.1 billion at the end of 1995). Of the total, $10.3 billion related to
products, about 39% of which was scheduled for delivery in 1997, and the
remainder related to 1997 services.
TECHNICAL PRODUCTS AND SERVICES revenues were up 6% in 1996, following a 3%
increase in 1995. Medical Systems reported higher revenues in both years,
reflecting growth in new equipment volume and equipment services, partially
offset by lower selling prices. Information Services revenues were essentially
flat in 1996, following a slight increase in 1995, as selling prices declined
and electronic commerce volume expanded. Operating profit for the segment
increased 6% in 1996 as productivity, improved results in services at Medical
Systems and the higher volume more than offset the effect of lower selling
prices. Segment operating profit increased 2% in 1995, primarily a result of
productivity gains.
Orders received by Medical Systems in 1996 were $3.9 billion, up 5% from
1995. The backlog of unfilled orders at year-end 1996 was $2.4 billion, about
the same as at the end of 1995. Of the total, $1.4 billion related to products,
about 90% of which was scheduled for delivery in 1997, and the remainder related
to 1997 services.
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.
F-11
ANNUAL REPORT PAGE 37
================================================================================
SUMMARY OF INDUSTRY SEGMENTS
[Enlarge/Download Table]
General Electric Company and consolidated affiliates
---------------------------------------------------------
For the years ended December 31 (In millions) 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
REVENUES
GE
Aircraft Engines $ 6,302 $ 6,098 $ 5,714 $ 6,580 $ 7,368
Appliances 6,375 5,933 5,965 5,555 5,330
Broadcasting 5,232 3,919 3,361 3,102 3,363
Industrial Products and Systems 10,412 10,194 9,406 8,575 8,210
Materials 6,509 6,647 5,681 5,042 4,853
Power Generation 7,257 6,545 5,933 5,530 5,106
Technical Products and Services 4,692 4,424 4,285 4,174 4,674
All Other 3,108 2,707 2,348 1,803 1,581
Corporate items and eliminations (322) (286) (195) (242) (399)
-------- -------- -------- -------- --------
Total GE 49,565 46,181 42,498 40,119 40,086
-------- -------- -------- -------- --------
GECS
Financing 23,742 19,042 14,932 12,399 10,544
Specialty Insurance 8,966 7,444 4,926 4,862 3,863
All Other 5 6 17 15 11
-------- -------- -------- -------- --------
Total GECS 32,713 26,492 19,875 17,276 14,418
-------- -------- -------- -------- --------
Eliminations (3,099) (2,645) (2,264) (1,694) (1,453)
-------- -------- -------- -------- --------
CONSOLIDATED REVENUES $ 79,179 $ 70,028 $ 60,109 $ 55,701 $ 53,051
======== ======== ======== ======== ========
---------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT
GE
Aircraft Engines $ 1,225 $ 1,176 $ 935 $ 798 $ 1,274
Appliances 750 697 683 372 386
Broadcasting 953 738 500 264 204
Industrial Products and Systems 1,617 1,519 1,328 901 1,071
Materials 1,466 1,465 967 834 740
Power Generation 1,068 769 1,238 1,024 854
Technical Products and Services 849 801 787 706 912
All Other 3,088 2,683 2,309 1,725 1,495
-------- -------- -------- -------- --------
Total GE 11,016 9,848 8,747 6,624 6,936
-------- -------- -------- -------- --------
GECS
Financing 3,465 3,045 2,662 1,727 1,366
Specialty Insurance 1,234 1,020 589 770 641
All Other (651) (545) (302) (288) (272)
-------- -------- -------- -------- --------
Total GECS 4,048 3,520 2,949 2,209 1,735
-------- -------- -------- -------- --------
Eliminations (2,795) (2,396) (2,072) (1,554) (1,317)
-------- -------- -------- -------- --------
CONSOLIDATED OPERATING PROFIT 12,269 10,972 9,624 7,279 7,354
GE interest and financial charges-- net of eliminations (600) (644) (417) (529) (752)
GE items not traceable to segments (863) (591) (546) (614) (629)
-------- -------- -------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
AND ACCOUNTING CHANGE $ 10,806 $ 9,737 $ 8,661 $ 6,136 $ 5,973
======== ======== ======== ======== ========
---------------------------------------------------------------------------------------------------------------------
<FN>
The notes to consolidated financial statements on pages 47-66 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 other financial charges, which is
the largest element of GECS' operating costs. The 1993 accounting change represents adoption of Statement of Financial
Accounting Standards (SFAS) No. 112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS.
F-12
ANNUAL REPORT PAGE 38
GECS CONTINUING OPERATIONS
GECS conducts its operations in two segments -- Financing and Specialty
Insurance. The Financing segment includes the financing and consumer savings and
insurance operations of General Electric Capital Corporation (GE Capital). The
consumer savings and insurance operations, which increased significantly in 1996
due to acquisitions, focus on consumer wealth accumulation and transfer as well
as wealth and lifestyle protection. The Specialty Insurance segment includes
operations of GE Global Insurance Holding Corporation (GE Global Insurance), the
principal subsidiary of which is Employers Reinsurance Corporation, and the
other insurance businesses described on page 63.
IMPROVED OPERATING RESULTS for 1996 and 1995 reflect the effects of continued
asset growth, principally from acquisitions of businesses and portfolios in
1996, and equal contributions from acquisitions and origination volume in 1995.
* GECS revenues from operations were $32.7 billion in 1996, up 23% from 1995,
which was up 33% from 1994.
* GECS earnings from continuing operations were $2.8 billion in 1996, up 17%
from 1995, which was up 16% from 1994. The 1996 and 1995 increases
primarily reflected asset growth, with the 1995 increase partially offset
by a decrease in financing spreads (the excess of yields over interest
rates on borrowings).
* GECS interest on borrowings in 1996 was $7.3 billion, 10% higher than in
1995, which was 47% higher than in 1994. The increase in 1996 reflected the
effects of higher average borrowings used to finance asset growth,
partially offset by the effects of lower average interest rates. The 1995
increase resulted from higher average borrowings used to finance asset
growth and the effects of higher average interest rates. GECS' use of
floating rate versus fixed rate borrowings is largely a function of the
assets against which borrowings are matched. The composite interest rate on
GECS borrowings was 6.24% in 1996, compared with 6.76% in 1995 and 5.47% in
1994.
* GECS insurance losses and policyholder and annuity benefits increased to
$6.7 billion during 1996, compared with $5.3 billion in 1995 and $3.5
billion in 1994, primarily because of business acquisitions and growth in
originations throughout the period.
* GECS other costs and expenses increased to $13.5 billion in 1996 from $9.8
billion in 1995 and $7.9 billion in 1994, reflecting costs associated with
acquired businesses and portfolios, and higher investment levels.
[CHART HERE]
GECS REVENUES
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$14.418 $17.276 $19.875 $26.492 $32.713
-----------------------------------------------------------------------------
GECS industry segment revenues and operating profit for the past five years are
shown in the table on page 37. Revenues from operations (earned income) are
detailed in note 4.
FINANCING SEGMENT revenues from operations increased 25% to $23.7 billion in
1996, following a 28% increase in 1995. Asset growth was the most significant
contributing factor in both years, but was partially offset in 1996 by lower
yields. Yields increased in 1995 and contributed slightly to the revenue
increase. A significant component of the 1996 revenue increase was the
contribution provided by the consumer savings and insurance businesses acquired
during 1995 and 1996 and the computer equipment businesses acquired during 1996.
Operating profit was $3.5 billion in 1996, 14% higher than in 1995. The 1996
increase resulted primarily from asset growth. Financing spreads were
essentially flat in 1996 as the reduction in yields was offset by decreases in
borrowing rates. Operating profit increased 14% in 1995 as the effects of asset
growth were partially offset by declining financing spreads and losses from
adverse market conditions in the Mortgage Services business. Changes in the
provision for losses on financing receivables were principally caused by
different rates of portfolio growth in both years, with higher portfolio growth
from originations resulting in higher provisions in 1995 than in 1996. Insurance
losses and policyholder and annuity benefits associated with the consumer
savings and insurance operations increased during 1996 and 1995 as a result of
acquisitions. Other costs and expenses increased in both years, reflecting costs
associated with acquired businesses and portfolios and higher levels of
investment. Included in the 1996 increase are costs of sales and services of
computer equipment businesses acquired in 1996.
The portfolio of financing receivables, before allowance for losses,
increased to $102.4 billion at the end of 1996 from $95.8 billion at the end of
F-13
ANNUAL REPORT PAGE 39
1995. Financing receivables are the Financing segment's largest asset and its
primary source of revenues. The related allowance for losses at the end of 1996
amounted to $2.7 billion (2.63% of receivables -- the same as 1995 and 1994)
and, in management's judgment, is appropriate given the risk profile of the
portfolio. Amounts written off in 1996 were approximately 1.03% of the year's
average financing receivables, compared with 1.01% and 1.04% during 1995 and
1994, respectively. The increase in 1996 principally reflects increased
delinquencies in the consumer portfolio, consistent with industry experience.
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 commercial receivables whose
terms have been restructured to a below-market yield.
CONSUMER RECEIVABLES at year-end 1996 and 1995 are shown in the following
table:
--------------------------------------------------------------------------------
(In millions) 1996 1995
--------------------------------------------------------------------------------
Credit card and personal loans $27,127 $23,937
Auto loans 5,915 5,555
Auto financing leases 13,113 12,461
------- -------
Total consumer $46,155 $41,953
======= =======
Nonearning $ 926 $ 671
-- As percentage of total 2.0% 1.6%
Receivable write-offs for the year $ 870 $ 644
--------------------------------------------------------------------------------
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.
COMMERCIAL REAL ESTATE LOANS classified as financing receivables were $12.1
billion at December 31, 1996, a decrease of $1.3 billion from 1995, principally
reflecting sales of receivables. Nonearning and reduced-earning receivables
decreased to $158 million at December 31, 1996, compared with $179 million at
year-end 1995. Write-offs of commercial real estate loans declined to $45
million in 1996 from $147 million in 1995 as markets continued to stabilize.
Commercial real estate loans are generally secured by first mortgages.
In addition to loans, the commercial real estate portfolio included, in other
assets, $1.6 billion at year-end 1996 ($1.9 billion at year-end 1995) of assets
acquired for resale from various financial institutions. Values realized on
sales of these assets continue to meet or exceed expectations at the time of
purchase. Also included in other assets were investments in real estate ventures
at year-end 1996 totaling $2.5 billion, up from $2.0 billion at year-end 1995.
Those investments are made as a part of original financings or in conjunction
with certain loan restructurings. 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.
[CHART HERE]
GECS EARNINGS FROM CONTINUING OPERATIONS
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$1.331 $1.567 $2.085 $2.415 $2.817
-----------------------------------------------------------------------------
OTHER FINANCING RECEIVABLES, totaling $44.1 billion at December 31, 1996,
consisted of a diverse commercial, industrial and equipment loan and lease
portfolio. This portfolio increased $3.7 billion during 1996, primarily because
of acquisitions. Related nonearning and reduced-earning receivables were $313
million at year-end 1996, compared with $285 million at year-end 1995.
GECS held loans and leases to commercial airlines amounting to $8.2 billion
at the end of 1996, down from $8.3 billion at the end of 1995. GECS' commercial
aircraft positions also included financial guarantees, funding commitments and
aircraft orders as discussed in note 17.
SPECIALTY INSURANCE SEGMENT revenues from operations were $9 billion in 1996, an
increase of 20% from 1995, which increased 51% over 1994. The 1996 increase
primarily reflected inclusion of a full year's results for the European property
and casualty reinsurance businesses acquired in 1995. GE Global Insurance's net
premiums earned on U.S. business declined, reflecting the effects of lower
industry pricing and the exit of certain unprofitable reinsurance contracts.
Revenues from GECS' other insurance businesses increased as a result of both
origination volume and acquisitions. Operating profit increased 21% to $1.2
billion in 1996 from $1.0 billion in 1995. The increase in 1996 principally
reflected the effects of a full year's results of the European acquisitions:
higher premium and investment income, partially offset by increases in insurance
losses and other costs and expenses.
F-14
ANNUAL REPORT PAGE 40
INTERNATIONAL OPERATIONS
Estimated results of international operations include all exports from the
United States, plus the results of GE and GECS operations located outside the
United States. Certain GECS operations that cannot meaningfully be associated
with specific geographic areas were reclassified as "international" for this
purpose and are not included in specific geographic areas.
International revenues in 1996 were $33.3 billion (42% of consolidated
revenues), compared with $28.2 billion in 1995 and $21.0 billion in 1994. In
1996, about 46% of GE's sales of goods and services were international, which
was about the same percentage as in 1995 and much higher than the 40% reported
in 1994. The chart below left depicts the growth in international revenues in
relation to total revenues over the past five years.
International operating profit was $4.0 billion (32% of consolidated
operating profit) in 1996, compared with $3.2 billion in 1995 and $2.5 billion
in 1994.
GE international revenues were $21.7 billion in 1996, an increase of 8% from
1995, reflecting sales growth in operations based outside the United States and
U.S. exports. European revenues increased by $1.1 billion as growth in Power
Systems, particularly in Nuovo Pignone, and Aircraft Engines more than offset
lower sales in Plastics and Medical Systems. GE's Pacific Basin revenues
increased by $0.1 billion in 1996, reflecting increased revenues from local
operations, partially offset by lower U.S. export sales to the region.
GECS international revenues were $11.6 billion in 1996 and year-end assets
were about $65.3 billion. These revenues, which were derived primarily from
operations in Europe, Canada and the Pacific Basin, were up from $8.1 billion in
1995; year-end assets increased 23% during the year from approximately $53.3
billion at the end of 1995. These increases are attributable to continued
expansion of GECS as a global provider of financial products and services.
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 in the international revenues chart at the bottom
right of this page. Principal currencies include major European currencies as
well as the Japanese yen and the Canadian dollar.
GE's U.S. export sales follow.
--------------------------------------------------------------------------------
GE'S TOTAL EXPORTS FROM THE UNITED STATES
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
Pacific Basin $3,180 $3,397 $3,260
Europe 2,060 1,701 1,319
Americas 1,257 1,023 1,027
Other 1,025 964 821
------ ------ ------
Exports to external customers 7,522 7,085 6,427
Exports to affiliates 2,292 2,123 1,683
------ ------ ------
Total exports $9,814 $9,208 $8,110
====== ====== ======
--------------------------------------------------------------------------------
GE made a positive 1996 contribution of approximately $5.2 billion to the
U.S. balance of trade. Total exports in 1996 were $9.8 billion; direct imports
from external suppliers were $2.8 billion; and imports from GE affiliates were
$1.8 billion.
[CHART HERE]
CONSOLIDATED REVENUES
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
UNITED STATES $34.712 $36.447 $39.149 $41.780 $45.886
INTERNATIONAL 18.339 19.254 20.960 28.248 33.293
-----------------------------------------------------------------------------
[CHART HERE]
CONSOLIDATED INTERNATIONAL REVENUES
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
Europe $8.716 $9.037 $8.994 $13.993 $18.024
Pacific Basin 4.349 4.474 5.922 7.122 7.523
Americas 3.315 3.073 3.437 4.105 4.700
Other 1.959 2.670 2.607 3.028 3.046
-----------------------------------------------------------------------------
F-15
ANNUAL REPORT PAGE 41
================================================================================
MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
This discussion of financial resources and liquidity focuses on the Statement of
Financial Position (page 30) and the Statement of Cash Flows (page 32).
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, consumer
savings and insurance, and other insurance and 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" or 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 17). Management believes that 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
and investment businesses in support of obligations to policyholders and
annuitants. The increase of $18.8 billion at GECS during 1996 was principally
related to acquisitions. A breakdown of the investment securities portfolio is
provided in note 10.
GE CURRENT RECEIVABLES were $8.8 billion at the end of 1996, approximately the
same as at year-end 1995, and included $6.6 billion due from customers at the
end of both 1996 and 1995. As a measure of asset utilization, customer
receivables turnover was 6.8 in 1996, compared with 6.7 in 1995. 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.
[CHART HERE]
GE ANNUAL INVENTORY TURNOVER
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
5.26 5.97 6.86 6.9 7.57
-----------------------------------------------------------------------------
GE INVENTORIES were $4.5 billion at December 31, 1996, up $0.1 billion from the
end of 1995. As shown in the chart above, inventory turnover improved to 7.6 in
1996, compared with 6.9 in 1995, reflecting continuing improvements in inventory
management. Last-in, first-out (LIFO) revaluations decreased $128 million in
1996, compared with decreases of $87 million in 1995 and $197 million in 1994.
Included in these changes were decreases of $58 million, $88 million and $72
million (1996, 1995 and 1994, respectively) that resulted from lower LIFO
inventory levels. There were net cost decreases in 1996 and 1994 and no cost
change in 1995.
GECS FINANCING RECEIVABLES were $99.7 billion at year-end 1996, net of allowance
for doubtful accounts, up $6.4 billion over 1995. These receivables are
discussed on page 38 and in notes 8 and 13.
GECS OTHER RECEIVABLES were $16.0 billion and $12.9 billion at December 31, 1996
and 1995, respectively. The 1996 increase was attributable to insurance
activities, particularly increases in premiums receivable and reinsurance
recoverables from acquired businesses as well as a general increase in
underwriting activity.
PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $28.8
billion at December 31, 1996, up $3.1 billion from 1995. 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 15.
GE's total expenditures for new plant and equipment during 1996 totaled $2.4
billion, up 33% from $1.8 billion in 1995. Total expenditures for the past five
F-16
ANNUAL REPORT PAGE 42
years were $9.1 billion, of which 36% was investment for growth through new
capacity and product development; 35% was investment in productivity through new
equipment and process improvements; 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 $5.3 billion during
1996 ($4.5 billion during 1995), principally reflecting a shift in auto lease
volume from financing leases in 1995 to operating leases in 1996 and increased
volume in aircraft.
INTANGIBLE ASSETS were $16.0 billion at year-end 1996, up from $11.7 billion at
year-end 1995. GE intangibles increased to $7.4 billion from $6.6 billion at the
end of 1995, principally as a result of goodwill related to certain broadcasting
acquisitions. The $3.6 billion increase in GECS intangibles related to
acquisitions.
ALL OTHER ASSETS totaled $35.2 billion at year-end 1996, an increase of $7.2
billion from the end of 1995. GE other assets increased $1.3 billion, reflecting
an increase in the prepaid pension asset and increased investments in associated
companies. The increase in GECS other assets of $5.9 billion related principally
to acquisitions and increased investments in associated companies.
INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $61.3 billion, $21.6
billion higher than in 1995. The increase was primarily attributable to
acquisitions in 1996. For additional information on these liabilities, see note
20.
CONSOLIDATED BORROWINGS aggregated $129.4 billion at December 31, 1996, compared
with $115.5 billion at the end of 1995. 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 guaranteed
subordinated debt of GECS with a face amount of $1.0 billion at December 31,
1996 and 1995. Management believes the likelihood that GE will be required to
contribute capital under either the commitments or the guarantees is remote.
GE's total borrowings were $4.0 billion at year-end 1996 ($2.3 billion
short-term, $1.7 billion long-term), an increase of about $0.1 billion from
year-end 1995. GE's total debt at the end of 1996 equaled 11.4% of total
capital, down from 11.6% at the end of 1995.
GECS' total borrowings were $125.6 billion at December 31, 1996, of which
$77.9 billion is due in 1997 and $47.7 billion is due in subsequent years.
Comparable amounts at the end of 1995 were $111.6 billion total, $62.8 billion
due within one year and $48.8 billion due thereafter. GECS' composite interest
rates are discussed on page 38. A large portion of GECS' borrowings ($54.2
billion and $41.2 billion at the end of 1996 and 1995, 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 was
issued by GE Capital. The average remaining terms and interest rates of GE
Capital's commercial paper were 42 days and 5.58% at the end of 1996, compared
with 41 days and 5.88% at the end of 1995. GE Capital's leverage (ratio of debt
to equity, excluding from equity net unrealized gains on investment securities)
was 7.92 to 1 at the end of 1996 and 7.89 to 1 at the end of 1995. By
comparison, including in equity net unrealized gains on investment securities,
GE Capital's ratio of debt to equity was 7.84 to 1 at the end of 1996 and 7.59
to 1 at the end of 1995.
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 its relatively low level of
borrowings means that currency management is more important than managing
exposure to changes in interest rates. On the other hand, despite strong
international growth, changes in interest rates remain the more significant
exposure for GECS because of the potential effects of such changes on financing
spreads.
[CHART HERE]
GE CASH FLOWS FROM OPERATING ACTIVITIES
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$4.573 $5.201 $6.071 $6.065 $9.067
-----------------------------------------------------------------------------
F-17
ANNUAL REPORT PAGE 43
The relationship between interest rate changes and financing spreads is
subject to many factors and cannot be forecasted with reliability. Although not
necessarily predictive of future effects, management estimates that, all else
constant, an increase of 100 basis points in interest rates for all of 1996
would have reduced GECS net earnings by approximately $74 million. For
comparison, the effect on 1995 net earnings would have been $65 million.
GE and GECS use various financial instruments, particularly interest rate,
currency and basis swaps, but also futures, 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.
More detailed information regarding these financial instruments, as well as
the strategies and policies for their use, is contained in notes 1, 19 and 30.
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 $1.0 billion at the end of 1996, about the
same as at the end of 1995. During 1996, GE generated a record $9.1 billion in
cash from operating activities, an increase of $3.0 billion over 1995,
principally as a result of improvements in working capital, including progress
collections, and earnings. The 1996 cash generation provided most of the
resources needed to repurchase $3.3 billion of GE common stock under share
repurchase programs, to pay $3.1 billion in dividends to share owners, to invest
$2.4 billion in new plant and equipment and to make $1.1 billion in
acquisitions.
Operating activities are the principal source of GE's cash flows. Over the
past three years, operating activities have provided more than $21 billion of
cash. The principal application of this cash was distributions of more than $14
billion to share owners, both through payment of dividends ($8.3 billion) and
through the share repurchase program ($6.4 billion) described below. Other
applications included investment in new plant and equipment ($6.0 billion) and
reduction of debt ($0.9 billion).
In December 1996, GE's Board of Directors increased the authorization to
repurchase Company common stock to $13 billion and authorized the program to
continue through 1998. Funds used for the share repurchase will be generated
largely from free cash flow.
[CHART HERE]
GE CUMULATIVE CASH FLOWS
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES $4.573 $9.774 $15.845 $21.910 $30.973
SHARES REPURCHASED 1.925 4.078 6.540 9.310 12.360
DIVIDENDS PAID 1.132 1.839 2.912 6.014 9.280
-----------------------------------------------------------------------------
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 are expected to be about $2 billion in 1997, principally for
productivity and growth.
GECS
One of GECS' primary sources 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 increased by $4.3
billion. New borrowings of $82.2 billion having maturities longer than 90 days
were added during those years, while $53.4 billion of such longer-term
borrowings were retired. GECS also generated $26.7 billion from continuing
operating activities.
GECS' principal use of cash has been investing in assets to grow its
businesses. Of the $55.2 billion that GECS invested over the past three years,
$23.1 billion was used for additions to financing receivables, $15.7 billion was
used to invest in new equipment, principally for lease to others, and $11.8
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 44
================================================================================
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 businesses.
GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,886 million in 1996,
about the same as in 1995. In 1996, expenditures from GE's own funds were $1,421
million, an increase of 9% over 1995, reflecting continuing research and
development work related to new product and process technologies. Such efforts
include development work on the next generation of gas turbines, new process
technologies to improve quality and performance and increase capacity in
engineered materials, further advances in state-of-the-art diagnostic imaging
technologies, and development of more powerful versions of the GE90 and the
industry's best-selling engine, the CFM56. Expenditures from funds provided by
customers (mainly the U.S. government) were $465 million in 1996, down $128
million from 1995, primarily reflecting decreases in the F414 program at
Aircraft Engines, which is nearing the end of the development phase, and, to a
lesser extent, lower activity in the F118 engine program.
GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1996 was $26.2 billion,
compared with $25.7 billion at the end of 1995. Of the total, $23.3 billion
related to products, about 48% of which was scheduled for delivery in 1997.
Services orders are included in backlog at the end of 1996 for only the
succeeding 12 months; such backlog was $2.9 billion. Orders constituting this
backlog may be canceled or deferred by customers, subject in certain cases to
cancellation penalties. See Industry Segments beginning on page 35 for further
discussion on unfilled orders of relatively long-cycle manufacturing businesses.
REGARDING ENVIRONMENTAL MATTERS, GE'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 1996, GE expended about $87 million for capital projects related to the
environment. The comparable amount in 1995 was $75 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 1996, the same as
in 1995. 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.
[CHART HERE]
YEAR-END MARKET CAPITALIZATION
-----------------------------------------------------------------------------
(In billions) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
$73.139 $89.527 $87.004 $119.989 $162.604
-----------------------------------------------------------------------------
[CHART HERE]
GE SHARE PRICE ACTIVITY
-----------------------------------------------------------------------------
(In dollars) 1992 1993 1994 1995 1996
-----------------------------------------------------------------------------
CLOSE $ 42.75 $ 52.44 $ 51.00 $ 72.00 $ 98.875
HIGH 43.75 53.50 54.875 73.125 106.125
LOW 36.375 40.375 45.00 49.875 69.50
-----------------------------------------------------------------------------
F-19
ANNUAL REPORT PAGE 45
================================================================================
SELECTED FINANCIAL DATA
[Enlarge/Download Table]
(Dollar amounts in millions; -------------------------------------------------------------------------
per-share amounts in dollars) 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Revenues $ 79,179 $ 70,028 $ 60,109 $ 55,701 $ 53,051
Earnings from continuing operations 7,280 6,573 5,915 4,184 4,137
Earnings (loss) from discontinued operations -- -- (1,189) 993 588
Effect of accounting change -- -- -- (862) --
Net earnings 7,280 6,573 4,726 4,315 4,725
Dividends declared 3,138 2,838 2,546 2,229 1,985
Earned on average share owners' equity 24.0% 23.5% 18.1% 17.5% 20.9%
Per share
Earnings from continuing operations $ 4.40 $ 3.90 $ 3.46 $ 2.45 $ 2.41
Earnings (loss) from discontinued operations -- -- (0.69) 0.58 0.34
Effect of accounting change -- -- -- (0.51) --
Net earnings 4.40 3.90 2.77 2.52 2.75
Dividends declared 1.90 1.69 1.49 1.305 1.16
Stock price range 106 1/8-69 1/2 73 1/8-49 7/8 54 7/8-45 53 1/2-40 3/8 43 3/4-36 3/8
Total assets of continuing operations 272,402 228,035 185,871 166,413 135,472
Long-term borrowings 49,246 51,027 36,979 28,194 25,298
Shares outstanding -- average (in thousands) 1,653,697 1,683,812 1,708,738 1,707,979 1,714,396
Share owner accounts -- average 486,000 460,000 458,000 464,000 481,000
Employees at year end
United States 155,000 150,000 156,000 157,000 168,000
Other countries 84,000 72,000 60,000 59,000 58,000
Discontinued operations (primarily U.S.) -- -- 5,000 6,000 42,000
----------- ----------- ----------- ----------- -----------
Total employees 239,000 222,000 221,000 222,000 268,000
=========== =========== =========== =========== ===========
----------------------------------------------------------------------------------------------------------------------------------
GE DATA
Short-term borrowings $ 2,339 $ 1,666 $ 906 $ 2,391 $ 3,448
Long-term borrowings 1,710 2,277 2,699 2,413 3,420
Minority interest 477 434 382 355 350
Share owners' equity 31,125 29,609 26,387 25,824 23,459
----------- ----------- ----------- ----------- -----------
Total capital invested $ 35,651 $ 33,986 $ 30,374 $ 30,983 $30,677
=========== =========== =========== =========== ===========
Return on average total capital invested 22.2% 21.3% 15.9% 15.2% 16.9%
Borrowings as a percentage of total
capital invested 11.4% 11.6% 11.9% 15.5% 22.4%
Working capital $ (2,147) $ 204 $ 544 $ (419) $ (822)
Additions to property, plant and equipment 2,389 1,831 1,743 1,588 1,445
----------------------------------------------------------------------------------------------------------------------------------
GECS DATA
Revenues $ 32,713 $ 26,492 $ 19,875 $ 17,276 $14,418
Earnings from continuing operations 2,817 2,415 2,085 1,567 1,331
Earnings (loss) from discontinued operations -- -- (1,189) 240 168
Net earnings 2,817 2,415 896 1,807 1,499
Share owner's equity 14,276 12,774 9,380 10,809 8,884
Minority interest 2,530 2,522 1,465 1,301 994
Borrowings from others 125,621 111,598 91,399 81,052 72,360
Ratio of debt to equity at GE Capital <F1> 7.92:1 7.89:1 7.94:1 7.96:1 7.91:1
Total assets of GE Capital $200,816 $160,825 $130,904 $117,939 $92,632
Reserve coverage on financing receivables 2.63% 2.63% 2.63% 2.63% 2.63%
Insurance premiums written $ 8,185 $ 6,158 $ 3,962 $ 3,956 $ 2,900
<FN>
<F1> Equity excludes net unrealized gains and losses on investment securities.
----------------------------------------------------------------------------------------------------------------------------------
Discontinued operations reflect the results of Kidder, Peabody, the GECS securities broker-dealer, in 1994, 1993 and 1992, and the
results of discontinued GE Aerospace businesses in 1993 and 1992. The 1993 accounting change represents the adoption of SFAS No.
112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS. "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 46
================================================================================
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 a vital ingredient for
Company quality programs as well as 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 provide 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 1996 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.
John F. Welch, Jr. Dennis D. Dammerman
Chairman of the Board and Senior Vice President, Finance, and
Chief Executive Officer Chief Financial Officer
February 7, 1997
================================================================================
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 17. 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 18. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, 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.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 7, 1997
F-21
ANNUAL REPORT PAGE 47
================================================================================
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 1996
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 unguaranteed 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.
Premium income from insurance activities is discussed under GECS insurance
accounting policies on page 48.
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.
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 used by GECS 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.
CASH AND EQUIVALENTS. Marketable securities with original maturities of three
months or less are included in cash equivalents unless designated as available
for sale and classified as investment securities.
INVESTMENT SECURITIES. Investments in debt securities that are not cash
equivalents and marketable equity securities have been designated 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. Realized gains and losses
on investments are determined using the specific identification method.
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.
F-22
ANNUAL REPORT PAGE 48
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.
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.
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 futures, 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.
Instruments used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in market values of hedge
instruments must be highly correlated with changes in market values of
underlying hedged items both at inception of the hedge and over the life of the
hedge contract. Any instrument designated but ineffective as a hedge is marked
to market and recognized in operations immediately.
GECS INSURANCE ACCOUNTING POLICIES. Accounting policies for GECS insurance
businesses are as follows:
PREMIUM INCOME. Insurance premiums are reported as earned income as follows:
* For property and casualty and accident and health risks contracts
(including financial guaranty insurance), premiums are reported as earned
income, generally on a pro rata basis, over the terms of related insurance
policies or reinsurance treaties.
* For retrospectively rated reinsurance contracts, premium adjustments are
recorded based on estimated losses and loss expenses, taking into
consideration both case and incurred-but-not-reported reserves.
* For term and whole life contracts, premiums are reported as earned income
when due under terms of respective policies.
* For annuity and investment contracts -- contracts that do not have
significant mortality or morbidity risk -- premiums are not reported as
revenues, but as liabilities (included in "Insurance liabilities, reserves
and annuity benefits") and are adjusted according to terms of the
respective policies.
DEFERRED POLICY ACQUISITION COSTS. Costs that vary with and are primarily
related to the acquisition of new and renewal insurance and investment contracts
are deferred and amortized systematically over the respective policy terms.
* For property and casualty and accident and health risks (including
financial guaranty insurance), these costs are amortized pro rata over the
contract periods in which the related premiums are earned.
* For term and whole life contracts, these costs are amortized over the
respective contract periods in proportion to either anticipated premium
income or gross profit, as appropriate.
* For annuity and investment contracts, these costs are amortized on the
basis of anticipated gross profits.
Periodically, deferred policy acquisition costs are reviewed for recoverability;
anticipated investment income is considered in making recoverability
evaluations.
PRESENT VALUE OF FUTURE PROFITS. The actuarially determined present value of
anticipated net cash flows to be realized from insurance, annuity and investment
contracts in force at the date of acquisition of life insurance enterprises is
recorded as the present value of future profits (PVFP). Amortization of PVFP is
based on gross profit projections from the underlying contracts, adjusted to
reflect actual experience and any impairment.
====================================================
2 DISCONTINUED OPERATIONS
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
--------------------------------------------------------------------------------
Revenues $ 4,578
=======
Loss before income taxes $ (551)
Income tax benefit 230
-------
Loss from discontinued operations (321)
Provision for loss-- net of income tax benefit of $266 (868)
-------
Loss from GECS securities broker-dealer $(1,189)
=======
--------------------------------------------------------------------------------
The 1994 provision of $868 million after taxes, shown in the summary above,
was related to exit costs associated with liquidation of Kidder, Peabody. This
liquidation has been substantially complete since mid-1995. In 1996, regulatory
authorities permitted Kidder, Peabody to de-register as a broker-dealer,
releasing approximately $900 million of investments that were used to repay
Kidder, Peabody borrowings.
F-23
ANNUAL REPORT PAGE 49
====================================================
3 GE OTHER INCOME
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
Royalty and technical agreements $ 391 $ 453 $ 395
Associated companies 50 111 115
Marketable securities and
bank deposits 72 70 77
Customer financing 29 26 28
Other investments
Dividends 79 62 62
Interest 18 18 21
Other items (10) 13 85
----- ----- -----
$ 629 $ 753 $ 783
===== ===== =====
-----
--------------------------------------------------------------------------------
====================================================
4 GECS REVENUES FROM OPERATIONS
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
Time sales, loan and other income $13,236 $10,462 $ 7,698
Operating lease rentals 4,341 4,080 3,802
Financing leases 3,485 3,176 2,539
Investment income 3,506 2,542 2,011
Premium and commission income of
insurance affiliates 8,145 6,232 3,825
------- ------- -------
$32,713 $26,492 $19,875
======= ======= =======
--------------------------------------------------------------------------------
Included in earned income from financing leases were pretax gains on the sale
of equipment at lease completion of $115 million in 1996, $191 million in 1995
and $180 million in 1994.
====================================================
5 SUPPLEMENTAL COST DETAILS
Total expenditures for research and development were $1,886 million, $1,892
million and $1,741 million in 1996, 1995 and 1994, respectively. The
Company-funded portion aggregated $1,421 million in 1996, $1,299 million in 1995
and $1,176 million in 1994.
Rental expense under operating leases is shown below.
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
GE $512 $523 $514
GECS 547 524 468
--------------------------------------------------------------------------------
At December 31, 1996, minimum rental commitments under noncancelable
operating leases aggregated $2,525 million and $3,112 million for GE and GECS,
respectively. Amounts payable over the next five years are shown below.
--------------------------------------------------------------------------------
(In millions) 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
GE $401 $342 $274 $197 $173
GECS 471 415 375 327 302
--------------------------------------------------------------------------------
GE's selling, general and administrative expense totaled $6,274 million in
1996, $5,743 million in 1995 and $5,211 million in 1994. Insignificant amounts
of interest were capitalized by GE and GECS in 1996, 1995 and 1994.
====================================================
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 in the United
States as well as approximately two-thirds of such GECS employees. 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 1996, the GE
Pension Plan covered approximately 471,000 participants, including 137,000
employees, 150,000 former employees with vested rights to future benefits, and
184,000 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.
[Download Table]
--------------------------------------------------------------------------------
PENSION PLAN INCOME
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
Actual return on plan assets $ 4,916 $ 5,439 $ 316
Unrecognized portion of return (2,329) (3,087) 1,951
Service cost for benefits earned<F1> (550) (469) (496)
Interest cost on benefit obligation (1,593) (1,580) (1,491)
Amortization 265 394 294
------- ------- -------
Total pension plan income $ 709 $ 697 $ 574
======= ======= =======
--------------------------------------------------------------------------------
<FN>
<F1> Net of employee contributions.
--------------------------------------------------------------------------------
Actual return on trust assets in 1996 was 17%, compared with the 9.5% assumed
return on such assets. The effect of this higher return will be recognized in
future years.
F-24
ANNUAL REPORT PAGE 50
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) 1996 1995
--------------------------------------------------------------------------------
Market-related value of assets $29,402 $27,795
Projected benefit obligation 23,251 23,119
--------------------------------------------------------------------------------
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 5% of trust assets.
An analysis of amounts shown in the Statement of Financial Position is shown
below.
--------------------------------------------------------------------------------
PREPAID PENSION ASSET
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Current value of trust assets $ 33,686 $ 30,200
Add (deduct) unamortized balances
SFAS No. 87 transition gain (615) (769)
Experience gains (5,357) (2,127)
Plan amendments 1,012 523
Projected benefit obligation (23,251) (23,119)
Pension liability 637 564
-------- --------
PREPAID PENSION ASSET $ 6,112 $ 5,272
======== ========
--------------------------------------------------------------------------------
The accumulated benefit obligation was $22,176 million and $22,052 million at
year-end 1996 and 1995, 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 ASSUMPTION
December 31 1996 1995
--------------------------------------------------------------------------------
Discount rate 7.5% 7.0%
Compensation increases 4.5 4.0
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 1996, these plans
covered approximately 250,000 retirees and dependents.
Details of cost for principal retiree benefit plans follow.
--------------------------------------------------------------------------------
COST OF RETIREE BENEFIT PLANS
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
RETIREE HEALTH PLANS
Service cost for benefits earned $ 77 $ 73 $ 78
Interest cost on benefit obligation 166 189 191
Amortization -- (12) (4)
----- ----- -----
Retiree health plan cost 243 250 265
----- ----- -----
RETIREE LIFE PLANS
Service cost for benefits earned 16 13 24
Interest cost on benefit obligation 106 108 105
Actual return on plan assets (225) (329) (2)
Unrecognized portion of return 93 206 (120)
Amortization 12 1 8
----- ----- -----
Retiree life plan cost (income) 2 (1) 15
----- ----- -----
TOTAL COST $ 245 $ 249 $ 280
===== ===== =====
--------------------------------------------------------------------------------
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) 1996 1995
--------------------------------------------------------------------------------
Market-related value of assets $1,487 $1,430
Accumulated postretirement benefit obligation 3,954 4,089
--------------------------------------------------------------------------------
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 3% of trust assets.
F-25
ANNUAL REPORT PAGE 51
An analysis of amounts shown in the Statement of Financial Position is shown
below.
[Enlarge/Download Table]
----------------------------------------------------------------------------------------
RETIREE BENEFIT LIABILITY/ASSET Health plans Life plans
------------------ ------------------
December 31 (In millions) 1996 1995 1996 1995
----------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
Retirees and dependents $ 1,889 $ 1,984 $ 1,305 $ 1,314
Employees eligible to retire 86 95 45 53
Other employees 440 451 189 192
------- ------- ------- -------
2,415 2,530 1,539 1,559
Add (deduct) unamortized balances
Experience losses (195) (292) (41) (199)
Plan amendments 157 177 109 119
Current value of trust assets -- -- (1,682) (1,556)
------- ------- ------- -------
RETIREE BENEFIT LIABILITY (PREPAID ASSET) $ 2,377 $ 2,415 $ (75) $ (77)
======= ======= ======= =======
----------------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS AND TECHNIQUES used to determine costs and benefit
obligations for principal retiree benefit plans are shown below.
[Download Table]
--------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
December 31 1996 1995
--------------------------------------------------------------------------------
Discount rate 7.5% 7.0%
Compensation increases 4.5 4.0
Health care cost trend <F1> 8.0 8.5
Return on assets for the year 9.5 9.5
--------------------------------------------------------------------------------
<FN>
<F1> Gradually declining to 5.0% after 2002.
--------------------------------------------------------------------------------
Increasing the health care cost trend rates by one percentage point would not
have had a material effect on the December 31, 1996, 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
The allowance for losses on 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) 1996 1995 1994
--------------------------------------------------------------------------------
Balance at January 1 $ 2,519 $ 2,062 $ 1,730
Provisions charged to operations 1,033 1,117 873
Net transfers related to companies
acquired or sold 139 217 199
Amounts written off -- net (998) (877) (740)
------- ------- -------
Balance at December 31 $ 2,693 $ 2,519 $ 2,062
======= ======= =======
--------------------------------------------------------------------------------
All accounts or portions thereof deemed to be uncollectible or to require an
excessive collection cost are written off to the allowance for losses.
Small-balance accounts generally are written off when 6 to 12 months delinquent,
although any balance judged to be uncollectible, such as an account in
bankruptcy, is written down immediately to estimated realizable value.
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 52
====================================================
9 PROVISION FOR INCOME TAXES
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
GE
Estimated amounts payable $2,235 $1,696 $1,305
Deferred tax expense from
temporary differences 60 363 577
------ ------ ------
2,295 2,059 1,882
------ ------ ------
GECS
Estimated amounts payable 164 434 447
Deferred tax expense from
temporary differences 1,067 671 417
------ ------ ------
1,231 1,105 864
------ ------ ------
CONSOLIDATED
Estimated amounts payable 2,399 2,130 1,752
Deferred tax expense from
temporary differences 1,127 1,034 994
------ ------ ------
$3,526 $3,164 $2,746
====== ====== ======
--------------------------------------------------------------------------------
GE includes GECS in filing a consolidated U.S. federal income tax return. The
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 $1,204 million, $721 million and $453 million in 1996,
1995 and 1994, 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.
Consolidated U.S. income before taxes was $8.0 billion in 1996, $7.6 billion
in 1995 and $7.3 billion in 1994. The corresponding amounts for non-U.S. based
operations were $2.8 billion in 1996, $2.1 billion in 1995 and $1.4 billion in
1994.
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS
STATUTORY TAX RATE TO ACTUAL RATE ------------------------- -------------------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---------------------------------------------------------------------------------------------------------------------------------
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 -- -- -- (10.3) (9.8) (9.4) -- -- --
Amortization of goodwill 1.1 1.1 1.1 0.8 0.8 0.8 1.2 1.1 1.0
Tax-exempt income (2.0) (2.1) (2.4) -- -- -- (5.4) (5.8) (6.9)
Foreign Sales Corporation
tax benefits (0.7) (0.9) (1.1) (0.6) (1.1) (1.2) (0.3) -- --
Dividends received, not
fully taxable (0.6) (0.5) (0.5) (0.2) (0.2) (0.3) (1.1) (0.8) (0.8)
All other-- net (0.2) (0.1) (0.4) (0.7) (0.8) (0.8) 1.0 1.9 1.0
------ ------ ------ ------ ------ ------ ------ ------ ------
(2.4) (2.5) (3.3) (11.0) (11.1) (10.9) (4.6) (3.6) (5.7)
------ ------ ------ ------ ------ ------ ------ ------ ------
Actual income tax rate 32.6% 32.5% 31.7% 24.0% 23.9% 24.1% 30.4% 31.4% 29.3%
====== ====== ====== ====== ====== ====== ====== ====== ======
---------------------------------------------------------------------------------------------------------------------------------
F-27
ANNUAL REPORT PAGE 53
====================================================
10 GECS INVESTMENT SECURITIES
[Enlarge/Download Table]
-------------------------------------------------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
-------------------------------------------------------------------------------------
DECEMBER 31, 1996
Debt securities
U.S. corporate $ 22,080 $ 308 $ (641) $ 21,747
State and municipal 10,232 399 (34) 10,597
Mortgage-backed 11,072 297 (108) 11,261
Corporate -- non-U.S 5,587 142 (13) 5,716
Government -- non-U.S 3,347 99 (2) 3,444
U.S. government and federal agency 2,340 34 (7) 2,367
Equity securities 4,117 677 (54) 4,740
-------- -------- -------- --------
$ 58,775 $ 1,956 $ (859) $ 59,872
======== ======== ======== ========
DECEMBER 31, 1995
Debt securities
U.S. corporate $ 12,313 $ 463 $ (63) $ 12,713
State and municipal 9,460 570 (11) 10,019
Mortgage-backed 5,991 255 (65) 6,181
Corporate-- non-U.S 3,764 98 (34) 3,828
Government-- non-U.S 3,123 115 (3) 3,235
U.S. government and federal agency 1,817 77 (3) 1,891
Equity securities 2,843 412 (59) 3,196
-------- -------- -------- --------
$ 39,311 $ 1,990 $ (238) $ 41,063
======== ======== ======== ========
-------------------------------------------------------------------------------------
The majority of mortgage-backed securities shown in the table above are
collateralized by U.S. residential mortgages. Mortgage-backed securities are
subject to prepayment risk, which affects yield but does not impair recovery of
principal.
At December 31, 1996, 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
1997 $ 2,569 $ 2,579
1998-2001 10,705 10,261
2002-2006 10,749 11,052
2007 and later 19,563 19,979
--------------------------------------------------------------------------------
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 1996 were $11,868 million ($11,017 million in 1995 and
$5,821 million in 1994). Gross realized gains were $638 million in 1996 ($503
million in 1995 and $281 million in 1994). Gross realized losses were $190
million in 1996 ($157 million in 1995 and $112 million in 1994).
====================================================
11 GE CURRENT RECEIVABLES
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Aircraft Engines $ 1,389 $ 1,373
Appliances 713 595
Broadcasting 698 556
Industrial Products and Systems 1,574 1,525
Materials 1,068 1,322
Power Generation 2,463 2,334
Technical Products and Services 698 692
All Other 86 94
Corporate 377 631
------- -------
9,066 9,122
Less allowance for losses (240) (231)
------- -------
$ 8,826 $ 8,891
======= =======
--------------------------------------------------------------------------------
Of receivables balances at December 31, 1996 and 1995, before allowance for
losses, $6,629 million and $6,582 million, respectively, were from sales of
goods and services to customers, and $290 million and $293 million,
respectively, were from transactions with associated companies.
Current receivables of $326 million at year-end 1996 and $322 million at
year-end 1995 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% of GE's sales of goods and services were
to the U.S. government in 1996 (about 5% and 6% in 1995 and 1994, respectively).
====================================================
12 GE INVENTORIES
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Raw materials and work in process $ 3,028 $ 3,205
Finished goods 2,404 2,277
Unbilled shipments 258 258
------- -------
5,690 5,740
Less revaluation to LIFO (1,217) (1,345)
------- -------
$ 4,473 $ 4,395
======= =======
--------------------------------------------------------------------------------
LIFO revaluations decreased $128 million in 1996, compared with decreases of
$87 million in 1995 and $197 million in 1994. Included in these changes were
decreases of $58 million, $88 million and $72 million in 1996, 1995 and 1994,
respectively, that resulted from lower LIFO inventory levels. There were net
cost decreases in 1996 and 1994, and no cost change in 1995. As of December 31,
1996, GE is obligated to acquire raw materials at market prices through the year
2003 under various take-or-pay or similar arrangements. Annual minimum
commitments under these arrangements are insignificant.
F-28
ANNUAL REPORT PAGE 54
====================================================
13 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME
SALES, LOANS AND FINANCING LEASES)
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
TIME SALES AND LOANS
Consumer services $ 40,479 $ 33,430
Specialized financing 14,584 18,230
Mid-market financing 9,914 8,795
Equipment management 760 1,371
Specialty insurance 339 189
--------- ---------
66,076 62,015
Deferred income (3,244) (2,424)
--------- ---------
Time sales and loans -- net 62,832 59,591
--------- ---------
INVESTMENT IN FINANCING LEASES
Direct financing leases 36,576 33,291
Leveraged leases 2,999 2,909
--------- ---------
Investment in financing leases 39,575 36,200
--------- ---------
102,407 95,791
Less allowance for losses (2,693) (2,519)
--------- ---------
$ 99,714 $ 93,272
========= =========
--------------------------------------------------------------------------------
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 1996 and 1995,
specialized financing and consumer services loans included $12,075 million and
$13,405 million, respectively, for commercial real estate loans. Note 17
contains information on airline loans and leases.
At December 31, 1996, contractual maturities for time sales and loans were
$28,128 million in 1997; $12,504 million in 1998; $7,255 million in 1999; $5,279
million in 2000; $3,743 million in 2001; and $9,167 million thereafter --
aggregating $66,076 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 unguaranteed 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.
At December 31, 1996, contractual maturities for rentals receivable under
financing leases were $12,890 million in 1997; $9,759 million in 1998; $6,716
million in 1999; $3,616 million in 2000; $2,071 million in 2001; and $8,744
million thereafter -- aggregating $43,796 million. As with time sales and loans,
experience has shown that a portion of these receivables will be paid prior to
contractual maturity, and these amounts should not be regarded as forecasts of
future cash flows.
[Enlarge/Download Table]
----------------------------------------------------------------------------------------------------------------------
NET INVESTMENT IN FINANCING LEASES Total financing leases Direct financing leases Leveraged leases
---------------------- ----------------------- --------------------
December 31 (In millions) 1996 1995 1996 1995 1996 1995
----------------------------------------------------------------------------------------------------------------------
Total minimum lease payments receivable $ 54,009 $ 50,059 $ 40,555 $ 37,434 $ 13,454 $ 12,625
Less principal and interest on third-party
nonrecourse debt (10,213) (9,329) -- -- (10,213) (9,329)
-------- -------- -------- -------- -------- --------
Net rentals receivable 43,796 40,730 40,555 37,434 3,241 3,296
Estimated unguaranteed residual value
of leased assets 6,248 5,768 4,906 4,630 1,342 1,138
Less deferred income (10,469) (10,298) (8,885) (8,773) (1,584) (1,525)
-------- -------- -------- -------- -------- --------
INVESTMENT IN FINANCING LEASES (as shown above) 39,575 36,200 36,576 33,291 2,999 2,909
Less amounts to arrive at net investment
Allowance for losses (720) (745) (641) (669) (79) (76)
Deferred taxes arising from financing leases (7,488) (6,243) (4,077) (3,215) (3,411) (3,028)
-------- -------- -------- -------- -------- --------
NET INVESTMENT IN FINANCING LEASES $ 31,367 $ 29,212 $ 31,858 $ 29,407 $ (491) $ (195)
======== ======== ======== ======== ======== ========
----------------------------------------------------------------------------------------------------------------------
F-29
ANNUAL REPORT PAGE 55
Nonearning consumer receivables, primarily private- label credit card
receivables, amounted to $926 million and $671 million at December 31, 1996 and
1995, 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 $471 million and $464 million at year-end
1996 and 1995, respectively.
"Impaired" loans are defined by generally accepted accounting principles as
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. That
definition excludes, among other things, leases or large groups of
smaller-balance homogenous loans, and therefore applies principally to GECS
commercial loans.
Under these principles, GECS has two types of "impaired" loans as of December
31, 1996 and 1995: loans requiring allowances for losses ($583 million and $647
million, respectively) and loans expected to be fully recoverable because the
carrying amount has been reduced previously through charge-offs or deferral of
income recognition ($187 million and $220 million, respectively); allowances for
losses on these loans were $222 million and $285 million, respectively. Average
investment in these loans during 1996 and 1995 was $842 million and $1,037
million, respectively, before allowance for losses; interest income earned,
principally on the cash basis, while they were considered impaired was $30
million and $49 million in 1996 and 1995, respectively.
====================================================
14 OTHER GECS RECEIVABLES
This account includes reinsurance recoverables of $4,403 million and $4,547
million and premiums receivable of $3,860 million and $3,001 million at year-end
1996 and 1995, respectively. Also included are amounts for accrued investment
income, trade receivables, operating lease receivables, insurance policy loans
and a variety of sundry items.
====================================================
15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
[Download Table]
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
ORIGINAL COST
GE
Land and improvements $ 476 $ 496
Buildings, structures and related equipment 6,315 6,063
Machinery and equipment 17,824 17,184
Leasehold costs and manufacturing
plant under construction 1,308 1,100
Other 27 24
------- -------
25,950 24,867
------- -------
GECS
Buildings and equipment 3,075 2,616
Equipment leased to others
Vehicles 6,789 4,948
Aircraft<F1> 6,647 5,682
Marine shipping containers 3,053 3,253
Railroad rolling stock 2,093 1,811
Other 3,177 2,769
------- -------
24,834 21,079
------- -------
$50,784 $45,946
======= =======
ACCUMULATED DEPRECIATION
AND AMORTIZATION
GE $15,118 $14,633
GECS
Buildings and equipment 1,246 964
Equipment leased to others <F1> 5,625 4,670
------- -------
$21,989 $20,267
======= =======
--------------------------------------------------------------------------------
<FN>
<F1>Includes $190 and $101, net, of commercial aircraft off-lease in 1996 and
1995, respectively.
--------------------------------------------------------------------------------
Amortization of GECS equipment leased to others was $1,848 million, $1,702
million and $1,435 million in 1996, 1995 and 1994, respectively. Noncancelable
future rentals due from customers for equipment on operating leases at year-end
1996 totaled $9,093 million and are due as follows: $2,908 million in 1997;
$1,923 million in 1998; $1,128 million in 1999; $686 million in 2000; $446
million in 2001; and $2,002 million thereafter.
Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
specifies circumstances in which certain long-lived assets must be reviewed for
impairment. 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. Adoption of this standard on January 1,
1996, did not have a material effect on the financial position or results of
operations of GE or GECS.
F-30
ANNUAL REPORT PAGE 56
====================================================
16 INTANGIBLE ASSETS
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
GE
Goodwill $ 6,676 $ 5,901
Other intangibles 691 742
------- -------
7,367 6,643
------- -------
GECS
Goodwill 5,847 3,984
Present value of future profits (PVFP) 2,438 624
Other intangibles 355 403
------- -------
8,640 5,011
------- -------
$16,007 $11,654
======= =======
--------------------------------------------------------------------------------
GE intangible assets are shown net of accumulated amortization of $2,637
million in 1996 and $2,347 million in 1995. GECS intangible assets are net of
accumulated amortization of $1,988 million in 1996 and $1,352 million in 1995.
GECS' year-end 1996 PVFP balance includes $1,896 million related to life
insurance enterprises acquired during 1996. PVFP amortization, which is on an
accelerated basis and net of interest, is projected to range from 11% to 8% of
the year-end 1996 unamortized balance for each of the next five years.
====================================================
17 ALL OTHER ASSETS
[Download Table]
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
GE
Investments
Associated companies<F1> $ 1,526 $ 1,201
Other 1,591 1,672
------- -------
3,117 2,873
Prepaid pension asset 6,112 5,272
Other 3,948 3,756
------- -------
13,177 11,901
------- -------
GECS
Investments
Assets acquired for resale 2,993 3,558
Associated companies<F1> 4,916 3,566
Real estate ventures 2,469 2,004
Other 2,095 2,072
------- -------
12,473 11,200
Separate accounts 3,516 --
Mortgage servicing rights 1,663 1,688
Deferred insurance acquisition costs 1,720 1,336
Other 2,662 1,868
------- -------
22,034 16,092
------- -------
$35,211 $27,993
======= =======
--------------------------------------------------------------------------------
<FN>
<F1>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 guarantees (principally guarantees)
amounting to $1,514 million at year-end 1996 and $1,433 million at year-end
1995; and it had entered into commitments totaling $1,554 million and $1,505
million at year-end 1996 and 1995, respectively, to provide financial assistance
on future aircraft engine sales. Estimated fair values of the aircraft securing
these receivables and associated guarantees exceeded the related account
balances and guaranteed amounts at December 31, 1996. GE sells certain long-term
receivables from the airline industry with recourse. Proceeds from such sales
amounted to $141 million in 1996 and $297 million in 1995. No receivables were
sold in 1994. Balances outstanding were $424 million and $487 million at
December 31, 1996 and 1995, respectively. GECS acts as a lender and lessor to
the commercial airline industry. At December 31, 1996 and 1995, the balance of
such GECS loans, leases and equipment leased to others was $8,240 million and
$8,337 million, respectively. In addition, at December 31, 1996, GECS had issued
financial guarantees and funding commitments of $221 million ($409 million at
year-end 1995) and had placed multiyear orders for various Boeing and Airbus
aircraft with list prices of approximately $6.5 billion.
At year-end 1996, the National Broadcasting Company had $7,744 million of
commitments to acquire broadcast material and 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 guarantees
totaling $3,250 million at year-end 1996 and $2,462 million at year-end 1995.
Separate accounts represent investments controlled by policyholders and are
associated with identical amounts reported as insurance liabilities in note 20.
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, is recognized as a charge to earnings. Adoption
of this standard on January 1, 1996, did not have a material effect on the
financial position or results of operations of GE or GECS.
F-31
ANNUAL REPORT PAGE 57
====================================================
18 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED
At year-end 1996 and 1995, this account included taxes accrued of $2,487 million
and $1,598 million, respectively, and compensation and benefit accruals of
$1,315 million and $1,233 million, respectively. Also included are amounts for
product warranties, estimated costs on shipments billed to customers and a
variety of sundry items.
====================================================
19 BORROWINGS
[Download Table]
--------------------------------------------------------------------------------
SHORT-TERM BORROWINGS
1996 1995
----------------------- -------------------------
December 31 Average Average
(In millions) Amount rate Amount rate
--------------------------------------------------------------------------------
GE
Commercial paper (U.S.) $ 914 5.41% $ 40 5.72%
Payable to banks 204 8.58 266 8.18
Current portion of
long-term debt 551 6.39<F1> 697 7.49<F1>
Other 670 300
-------- -------
2,339 1,666
-------- -------
GECS
Commercial paper
U.S 50,435 5.68 37,432 5.82
Non-U.S 3,737 4.30 3,796 6.33
Current portion of
long-term debt 16,471 6.17<F1> 15,719 6.51<F1>
Other 7,302 5,861
-------- -------
77,945 62,808
-------- -------
ELIMINATIONS (84) (11)
-------- -------
$ 80,200 $64,463
======== =======
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LONG-TERM BORROWINGS
1996
December 31 average
(In millions) rate<F1> Maturities 1996 1995
--------------------------------------------------------------------------------
GE
Senior notes 7.91% 1998-2000 $ 506 $ 988
Payable to banks 7.56 1998-2005 312 482
Industrial development/
pollution control
bonds 3.63 1998-2019 244 260
Other <F2> 648 547
-------- -------
1,710 2,277
-------- -------
GECS
Senior notes 6.18 1998-2055 46,680 47,794
Subordinated notes <F3> 7.88 2006-2035 996 996
-------- -------
47,676 48,790
-------- -------
ELIMINATIONS (140) (40)
-------- --------
$ 49,246 $ 51,027
======== ========
--------------------------------------------------------------------------------
<FN>
<F1> Includes the effects of associated interest rate and currency swaps.
<F2> Includes a variety of obligations having various interest rates and
maturities, including certain borrowings by parent operating components and
affiliates.
<F3> Guaranteed by GE.
--------------------------------------------------------------------------------
Borrowings of GE and GECS are addressed below from two perspectives --
liquidity and interest rate management. Additional information about borrowings
and associated swaps can be found in note 30.
LIQUIDITY requirements of GE and GECS are principally met through the credit
markets. Maturities of long-term borrowings during the next five years follow.
--------------------------------------------------------------------------------
(In millions) 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
GE $ 551 $ 1,043 $ 49 $ 70 $ 36
GECS 16,471 14,414 7,986 5,433 3,773
--------------------------------------------------------------------------------
Confirmed credit lines of approximately $3.6 billion had been extended to GE
by 23 banks at year-end 1996. Substantially all of GE's credit lines are
available to GECS and its affiliates in addition to their own credit lines.
At year-end 1996, GECS and its affiliates had committed lines of credit
aggregating $20.4 billion, including $11.2 billion of revolving credit
agreements pursuant to which it has the right to borrow funds for periods
exceeding one year. A total of $1.7 billion of GE Capital's credit lines is
available for use by GE.
During 1996, neither GE nor GECS borrowed under any of these credit lines.
Both GE and GECS compensate certain banks for credit facilities in the form of
fees, which were insignificant in each of the past three years.
INTEREST RATES ARE MANAGED by GECS in light of the anticipated behavior,
including prepayment behavior, of assets in which debt proceeds are invested. A
variety of instruments, including interest rate and currency swaps, are employed
to achieve management's interest rate objectives. Effective interest rates are
lower under these "synthetic" positions than could have been achieved by issuing
debt directly.
The following table shows GECS borrowing positions considering the effects of
swaps.
[Download Table]
--------------------------------------------------------------------------------
EFFECTIVE BORROWINGS (INCLUDING SWAPS)
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Short-term $46,450 $38,508
======= =======
Long-term (including current portion)
Fixed rate <F1> $56,190 $49,582
Floating rate 22,981 23,508
------- -------
Total long-term $79,171 $73,090
======= =======
--------------------------------------------------------------------------------
<FN>
<F1> Includes the notional amount of long-term interest rate swaps that
effectively convert the floating-rate nature of short-term borrowings to
fixed rates of interest.
--------------------------------------------------------------------------------
At December 31, 1996, interest rate swap maturities ranged from 1997 to 2029,
and weighted average interest rates for "synthetic" fixed-rate borrowings were
6.45% (6.62% at year-end 1995).
F-32
ANNUAL REPORT PAGE 58
====================================================
20 GECS INSURANCE LIABILITIES, RESERVES AND
ANNUITY BENEFITS
[Download Table]
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Annuity and investment contract benefits $20,210 $14,007
Life insurance benefits and other <F1> 19,784 9,223
Unpaid claims and claims adjustment expenses 13,184 12,662
Unearned premiums 4,633 3,807
Separate accounts (see note 17) 3,516 --
------- -------
$61,327 $39,699
======= =======
--------------------------------------------------------------------------------
<FN>
<F1> Life insurance benefits are accounted for mainly by a net-level-premium
method using estimated yields generally ranging from 5% to 9% in both 1996
and 1995.
--------------------------------------------------------------------------------
The liability for unpaid claims and claims adjustment expenses, principally
property and casualty reserves, consists of both case and incurred-but-not-
reported reserves. Where 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. A
summary of activity for this liability follows.
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
Balance at January 1-- gross $ 12,662 $ 7,032 $ 6,405
Less reinsurance recoverables (1,853) (1,084) (1,142)
-------- -------- --------
Balance at January 1-- net 10,809 5,948 5,263
Claims and expenses incurred
Current year 4,087 3,268 2,016
Prior years 104 492 558
Claims and expenses paid
Current year (1,357) (706) (543)
Prior years (2,373) (1,908) (1,432)
Claim reserves related to
acquired companies 309 3,696 49
Other (217) 19 37
-------- -------- --------
Balance at December 31-- net 11,362 10,809 5,948
Add reinsurance recoverables 1,822 1,853 1,084
-------- -------- --------
Balance at December 31-- gross $ 13,184 $ 12,662 $ 7,032
======== ======== ========
--------------------------------------------------------------------------------
Prior-year claims and expenses incurred in the above table resulted
principally from settling claims established in earlier accident years for
amounts that differed from expectations.
Financial guarantees and credit life risk of insurance affiliates are
summarized below.
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
Guarantees, principally on municipal
bonds and structured finance issues $ 140,575 $ 119,516
Mortgage insurance risk in force 36,279 32,599
Credit life insurance risk in force 25,961 13,670
Less reinsurance (32,413) (21,749)
--------- ---------
$ 170,402 $ 144,036
========= =========
--------------------------------------------------------------------------------
Insurance risk is ceded on both a pro rata and an excess basis. When GECS
cedes insurance to third parties, it is not relieved of its primary obligation
to policyholders. Losses on ceded risks give rise to claims for recovery;
allowances are established for such receivables from reinsurers.
The effects of reinsurance on premiums written and premiums and commissions
earned were as follows:
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
PREMIUMS WRITTEN
Direct $ 3,926 $ 2,984 $ 1,816
Assumed 5,455 3,978 2,696
Ceded (1,196) (804) (550)
------- ------- -------
$ 8,185 $ 6,158 $ 3,962
======= ======= =======
PREMIUMS AND COMMISSIONS EARNED
Direct $ 3,850 $ 2,604 $ 1,787
Assumed 5,353 4,414 2,596
Ceded (1,058) (786) (558)
------- ------- -------
$ 8,145 $ 6,232 $ 3,825
======= ======= =======
--------------------------------------------------------------------------------
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $937 million, $459 million and
$434 million for the years ended December 31, 1996, 1995 and 1994, respectively.
====================================================
21 GE ALL OTHER LIABILITIES
This account includes noncurrent compensation and benefit accruals at year-end
1996 and 1995 of $5,177 million and $4,858 million, respectively. Also included
are amounts for deferred incentive compensation, deferred income, product
warranties and a variety of sundry items.
Statement of Position No. 96-1, Environmental Remediation Liabilities,
provides authoritative guidance on the recognition, measurement, display and
disclosure of environmental remediation liabilities. The early adoption of this
standard as of January 1, 1996, did not have a material effect on the financial
position or results of operations of GE.
GE is involved in numerous remediation actions to clean up hazardous wastes
as required by federal and state laws. Liabilities for remediation costs at each
site are based on management's best estimate of undiscounted future costs
excluding possible insurance recoveries. When there appears to be a range of
possible costs with equal likelihood, liabilities are based on the lower end of
such range. Uncertainties about the status of laws, regulations, technology and
information related to individual sites make it difficult to develop a
meaningful estimate of the reasonably possible aggregate environmental
remediation exposure. However, even in the unlikely event that remediation costs
amounted to the high end of the range of costs for each site, the resulting
additional liability would not be material to GE's financial position, results
of operations or liquidity.
F-33
ANNUAL REPORT PAGE 59
====================================================
22 DEFERRED INCOME TAXES
Aggregate deferred tax amounts are summarized below.
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
ASSETS
GE $ 4,097 $ 3,851
GECS 3,310 1,974
------- -------
7,407 5,825
------- -------
LIABILITIES
GE 4,630 4,359
GECS 11,050 9,176
------- -------
15,680 13,535
------- -------
NET DEFERRED TAX LIABILITY $ 8,273 $ 7,710
======= =======
--------------------------------------------------------------------------------
Principal components of the net deferred tax liability balances for GE and
GECS are as follows:
--------------------------------------------------------------------------------
December 31 (In millions) 1996 1995
--------------------------------------------------------------------------------
GE
Provisions for expenses $(2,740) $(2,539)
Retiree insurance plans (806) (818)
Prepaid pension asset 2,139 1,845
Depreciation 836 928
Other -- net 1,104 1,092
------- -------
533 508
------- -------
GECS
Financing leases 7,488 6,243
Operating leases 1,833 1,485
Net unrealized gains on securities 404 608
Allowance for losses (1,184) (852)
Insurance reserves (787) (218)
AMT credit carryforwards (561) --
Other-- net 547 (64)
------- -------
7,740 7,202
------- -------
NET DEFERRED TAX LIABILITY $ 8,273 $ 7,710
======= =======
--------------------------------------------------------------------------------
====================================================
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) 1996 1995
--------------------------------------------------------------------------------
GE Capital $1,800 $1,800
GE Capital subsidiary 485 360
--------------------------------------------------------------------------------
Dividend rates on the preferred stock ranged from 3.8% to 5.2% during 1996,
from 4.2% to 5.2% during 1995 and from 2.3% to 4.9% during 1994.
====================================================
24 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 1996, net assets of regulated GECS affiliates amounted to $20.3
billion, of which $17.4 billion was restricted.
At December 31, 1996 and 1995, the aggregate statutory capital and surplus of
the insurance businesses totaled $10.2 billion and $7.7 billion, respectively.
In preparing statutory statements, no significant permitted accounting practices
are used that differ from prescribed accounting practices.
====================================================
25 SHARE OWNERS' EQUITY
--------------------------------------------------------------------------------
(In millions) 1996 1995 1994
--------------------------------------------------------------------------------
COMMON STOCK ISSUED
Balance at January 1 $ 594 $ 594 $ 584
Adjustment for stock split -- -- 9
Newly issued stock -- -- 1
-------- -------- --------
Balance at December 31 $ 594 $ 594 $ 594
======== ======== ========
UNREALIZED GAINS (LOSSES) ON
INVESTMENT SECURITIES -- NET $ 671 $ 1,000 $ (810)
======== ======== ========
OTHER CAPITAL
Balance at January 1 $ 1,663 $ 1,122 $ 550
Currency translation adjustments (117) 127 180
Gains on treasury stock dispositions 952 414 215
Newly issued stock -- -- 186
Adjustment for stock split -- -- (9)
-------- -------- --------
Balance at December 31 $ 2,498 $ 1,663 $ 1,122
======== ======== ========
RETAINED EARNINGS
Balance at January 1 $ 34,528 $ 30,793 $ 28,613
Net earnings 7,280 6,573 4,726
Dividends declared (3,138) (2,838) (2,546)
-------- -------- --------
Balance at December 31 $ 38,670 $ 34,528 $ 30,793
======== ======== ========
COMMON STOCK HELD IN TREASURY
Balance at January 1 $ 8,176 $ 5,312 $ 4,771
Purchases 4,842 4,016 1,124
Dispositions (1,710) (1,152) (583)
-------- -------- --------
Balance at December 31 $ 11,308 $ 8,176 $ 5,312
======== ======== ========
--------------------------------------------------------------------------------
In December 1996, GE's Board of Directors increased the authorization to
repurchase Company common stock to $13 billion and authorized the program to
continue through 1998. Funds used for the share repurchase will be generated
largely from free cash flow. At year-end 1996, a total of 93.5 million shares
having an aggregate cost of $6.4 billion had been repurchased under this program
and placed into treasury.
F-34
ANNUAL REPORT PAGE 60
Common shares issued and outstanding are summarized in the table below.
--------------------------------------------------------------------------------
SHARES OF GE COMMON STOCK
December 31 (In thousands) 1996 1995 1994
--------------------------------------------------------------------------------
Issued 1,857,013 1,857,013 1,857,013
In treasury (212,471) (190,501) (151,046)
---------- ---------- ----------
Outstanding 1,644,542 1,666,512 1,705,967
========== ========== ==========
--------------------------------------------------------------------------------
The Proxy Statement for the 1997 Annual Meeting of Share Owners will include
a proposal recommended by the Board of Directors on December 19, 1996, which, if
approved by share owners, would (a) increase the number of authorized shares of
common stock from 2,200,000,000 shares each with a par value of $0.32 to
4,400,000,000 shares each with a par value of $0.16 and (b) split each unissued
and issued common share, including shares held in treasury, into two shares of
common stock each with a par value of $0.16.
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. Cumulative currency translation adjustments represented reductions
of other capital of $56 million and $66 million in 1996 and 1994, respectively,
and an addition to other capital of $61 million in 1995.
====================================================
26 OTHER STOCK-RELATED INFORMATION
[Download Table]
--------------------------------------------------------------------------------
STOCK OPTION ACTIVITY Average per share
---------------------
Shares subject Exercise Market
(Shares in thousands) to option price price
--------------------------------------------------------------------------------
Balance at December 31, 1993 59,354 $ 36.50 $ 52.44
Options granted <F1> 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 9,517 84.77 84.77
Replacement options 4,311 52.67 52.67
Options exercised (9,138) 35.39 86.50
Options terminated (2,354) 52.38 --
------
Balance at December 31, 1996 74,773 49.72 98.88
======
--------------------------------------------------------------------------------
<FN>
<F1>Without adjusting for the effect of the 2-for-1 stock split in April 1994,
the number of options granted during 1994 would have been 10,117.
--------------------------------------------------------------------------------
Stock option plans, stock appreciation rights (SARs), restricted stock and
restricted stock units are described in GE's current Proxy Statement. With
certain restrictions, requirements for stock option shares can be met from
either unissued or treasury shares.
The replacement options replaced canceled SARs and have identical terms
thereto. At year-end 1996, there were 3.3 million SARs outstanding at an average
exercise price of $39.28. There were 4.2 million restricted stock shares and
restricted stock units outstanding at year-end 1996.
There were 31.1 million and 20.8 million shares available for grants of
options, SARs, restricted stock and restricted stock units at December 31, 1996
and 1995, 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 20,
2006. 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 effects
on 1995 and 1996 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, 1996.
[Download Table]
--------------------------------------------------------------------------------
STOCK OPTIONS OUTSTANDING
(Shares in thousands)
Outstanding Exercisable
------------------------------ ---------------------
Average Average
Exercise Average exercise exercise
price range Shares life <F1> price Shares price
--------------------------------------------------------------------------------
$21 5/8 - 33 15/16 10,778 3.4 $29.81 10,778 $29.81
$34 5/16 - 43 1/16 13,970 5.1 37.46 13,959 37.46
$43 1/4 - 51 19,815 6.9 47.43 11,477 45.63
$51 1/16 - 72 3/8 20,819 7.9 54.59 4,192 51.25
$75 3/4 - 102 1/4 9,391 9.6 84.83 -- --
------ ------
Total 74,773 6.7 49.72 40,406 39.17
====== ======
--------------------------------------------------------------------------------
<FN>
<F1>Average contractual life remaining in years.
--------------------------------------------------------------------------------
At year-end 1995, options with an average exercise price of $35.23 were
exercisable on 37 million shares; at year-end 1994, options with an average
exercise price of $33.43 were exercisable on 38 million shares.
--------------------------------------------------------------------------------
Stock options expire 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 61
====================================================
27 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, increases and decreases in progress collections, 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.
[Enlarge/Download Table]
--------------------------------------------------------------------------------------------------------
For the years ended December 31 (In millions) 1996 1995 1994
--------------------------------------------------------------------------------------------------------
GE
NET PURCHASE OF GE SHARES FOR TREASURY
Open market purchases under share repurchase programs $ (3,266) $ (3,101) $ (69)
Other purchases (1,576) (915) (1,055)
Dispositions (mainly to employee and dividend reinvestment plans) 2,519 1,493 771
-------- -------- --------
$ (2,323) $ (2,523) $ (353)
======== ======== ========
GECS
FINANCING RECEIVABLES
Increase in loans to customers $(49,890) $(46,154) $(37,059)
Principal collections from customers 49,923 44,840 31,264
Investment in equipment for financing leases (14,427) (17,182) (10,528)
Principal collections on financing leases 11,158 8,821 8,461
Net change in credit card receivables (3,068) (3,773) (2,902)
Sales of financing receivables with recourse 4,026 2,139 1,239
-------- -------- --------
$ (2,278) $(11,309) $ (9,525)
======== ======== ========
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses $(15,925) $(14,452) $ (8,663)
Dispositions and maturities of securities by
insurance and annuity businesses 14,018 12,460 6,338
Proceeds from principal business dispositions -- 575 --
Other (4,183) (2,496) 2,501
-------- -------- --------
$ (6,090) $ (3,913) $ 176
======== ======== ========
NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $ 5,061 $ 2,545 $ 3,214
Long-term (longer than one year) 17,245 32,507 19,228
Long-term subordinated -- 298 --
Proceeds-- nonrecourse, leveraged lease debt 595 1,428 31
-------- -------- --------
$ 22,901 $ 36,778 $ 22,473
======== ======== ========
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING
MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $(23,355) $(16,075) $(10,460)
Long-term (longer than one year) (1,025) (678) (930)
Principal payments-- nonrecourse, leveraged lease debt (276) (292) (309)
-------- -------- --------
$(24,656) $(17,045) $(11,699)
======== ======== ========
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment and annuity contracts $ 2,561 $ 1,754 $ 1,207
Preferred stock issued by GECS affiliates 155 1,045 240
Redemption of investment and annuity contracts (2,688) (2,540) (1,264)
-------- -------- --------
$ 28 $ 259 $ 183
======== ======== ========
OTHER
GECS DISCONTINUED SECURITIES BROKER-DEALER OPERATIONS (SEE NOTE 2)
Cash from operating activities $ 892 $ 1,414 $ 1,635
Cash from (used for) investing activities (93) 92 334
Cash used for financing activities (799) (1,506) (2,169)
-------- -------- --------
-- -- $ (200)
======== ======== ========
--------------------------------------------------------------------------------------------------------
F-36
ANNUAL REPORT PAGE 62
====================================================
28 INDUSTRY SEGMENTS
[Enlarge/Download Table]
---------------------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
---------------------------------------------------------------------------------------------------------------------------------
Total revenues Intersegment revenues External revenues
-------------------------------- -------------------------------- --------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---------------------------------------------------------------------------------------------------------------------------------
GE
Aircraft Engines $ 6,302 $ 6,098 $ 5,714 $ 86 $ 115 $ 43 $ 6,216 $ 5,983 $ 5,671
Appliances 6,375 5,933 5,965 5 4 3 6,370 5,929 5,962
Broadcasting 5,232 3,919 3,361 -- -- -- 5,232 3,919 3,361
Industrial Products
and Systems 10,412 10,194 9,406 455 436 368 9,957 9,758 9,038
Materials 6,509 6,647 5,681 22 19 43 6,487 6,628 5,638
Power Generation 7,257 6,545 5,933 65 57 44 7,192 6,488 5,889
Technical Products
and Services 4,692 4,424 4,285 23 19 18 4,669 4,405 4,267
All Other 3,108 2,707 2,348 -- -- -- 3,108 2,707 2,348
Corporate items
and eliminations (322) (286) (195) (656) (650) (519) 334 364 324
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total GE 49,565 46,181 42,498 -- -- -- 49,565 46,181 42,498
-------- -------- -------- -------- -------- -------- -------- -------- --------
GECS
Financing 23,742 19,042 14,932 -- -- -- 23,742 19,042 14,932
Specialty Insurance 8,966 7,444 4,926 -- -- -- 8,966 7,444 4,926
All Other 5 6 17 -- -- -- 5 6 17
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total GECS 32,713 26,492 19,875 -- -- -- 32,713 26,492 19,875
-------- -------- -------- -------- -------- -------- -------- -------- --------
Eliminations (3,099) (2,645) (2,264) -- -- -- (3,099) (2,645) (2,264)
-------- -------- -------- -------- -------- -------- -------- -------- --------
CONSOLIDATED REVENUES $ 79,179 $ 70,028 $ 60,109 $ -- $ -- $ -- $ 79,179 $ 70,028 $ 60,109
======== ======== ======== ======== ======== ======== ======== ======== ========
---------------------------------------------------------------------------------------------------------------------------------
<FN>
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.
---------------------------------------------------------------------------------------------------------------------------------
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------------------------------
ASSETS PROPERTY, PLANT AND EQUIPMENT
(INCLUDING EQUIPMENT LEASED TO OTHERS)
(In millions) At December 31 For the years ended December 31
------------------------------------------------------------------------------------------------------------------------------------
Additions Depreciation and amortization
-------------------------------- ------------------------------- --------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------------------------------------------------------------------------------------------------------------------------------------
GE
Aircraft Engines $ 5,423 $ 4,890 $ 4,751 $ 551 $ 266 $ 254 $ 260 $ 273 $ 261
Appliances 2,569 2,304 2,309 168 143 159 104 93 84
Broadcasting 4,899 3,915 3,881 176 97 86 86 64 67
Industrial Products
and Systems 6,580 6,117 5,862 450 446 448 340 308 363
Materials 9,130 9,095 8,628 748 521 550 475 478 443
Power Generation 5,741 5,679 4,887 185 155 337 165 166 143
Technical Products
and Services 2,246 2,200 2,362 154 110 154 113 109 95
All Other 14,556 13,113 9,768 -- 1 -- 2 1 2
Corporate items and
eliminations 8,781 8,403 8,365 114 113 97 90 89 87
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total GE 59,925 55,716 50,813 2,546 1,852 2,085 1,635 1,581 1,545
--------- --------- --------- --------- --------- --------- --------- --------- ---------
GECS
Financing 184,587 150,062 121,966 5,656 5,144 5,889 2,108 1,962 1,607
Specialty Insurance 41,575 34,795 22,058 42 132 62 32 24 16
All Other 1,257 872 943 64 36 44 10 27 39
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total GECS 227,419 185,729 144,967 5,762 5,312 5,995 2,150 2,013 1,662
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Eliminations (14,942) (13,410) (9,909) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED TOTALS $ 272,402 $ 228,035 $ 185,871 $ 8,308 $ 7,164 $ 8,080 $ 3,785 $ 3,594 $ 3,207
========= ========= ========= ========= ========= ========= ========= ========= =========
------------------------------------------------------------------------------------------------------------------------------------
<FN>
"All Other" GE assets consists primarily of investment in GECS. Additions to property, plant and equipment include amounts
relating to principal businesses purchased.
------------------------------------------------------------------------------------------------------------------------------------
F-37
ANNUAL REPORT PAGE 63
Details of operating profit by industry segment can be found on page 37 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 11 VHF
and UHF television broadcasting stations, operation of seven 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. Power plant products and services, including design,
installation, operation and maintenance services. Markets and competition are
global. Gas turbines are sold principally as part of 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. Power
Generation also includes nuclear reactors and fuel and support services for GE's
new and 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. Also 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 consumer savings and insurance
services.
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, sales 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, containers used on ocean-going vessels, 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 64
====================================================
29 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 40.
[Enlarge/Download Table]
----------------------------------------------------------------------------------------------------------------------------------
REVENUES
(In millions) For the years ended December 31
----------------------------------------------------------------------------------------------------------------------------------
Total revenues Intersegment revenues External revenues
-------------------------------- -------------------------------- ------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
United States $ 58,110 $ 52,935 $ 49,005 $ 2,292 $ 2,123 $ 1,683 $ 55,818 $ 50,812 $ 47,322
Europe 15,964 12,293 7,675 714 656 579 15,250 11,637 7,096
Pacific Basin 4,343 3,725 2,662 796 457 526 3,547 3,268 2,136
Other <F1> 5,140 4,750 3,868 576 439 313 4,564 4,311 3,555
Intercompany eliminations (4,378) (3,675) (3,101) (4,378) (3,675) (3,101) -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total $ 79,179 $ 70,028 $ 60,109 $ -- $ -- $ -- $ 79,179 $ 70,028 $ 60,109
======== ======== ======== ======== ======== ======== ======== ======== ========
----------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT ASSETS NON-U.S. ASSETS
(In million) For the years ended December 31 At December 31 At December 31
----------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995
----------------------------------------------------------------------------------------------------------------------
United States $ 9,693 $ 9,002 $8,443 $189,593 $158,884 $142,710 $ <F2> $ <F2>
Europe 1,724 1,043 570 55,196 44,107 21,587 23,021 20,059
Pacific Basin 269 375 177 8,125 6,442 4,491 5,082 3,740
Other <F1> 576 543 429 19,655 18,776 17,266 11,439 11,472
Intercompany eliminations 7 9 5 (167) (174) (183) (62) (51)
------- ------- ------ -------- -------- -------- ------- -------
Total $12,269 $10,972 $9,624 $272,402 $228,035 $185,871 $39,480 $35,220
======= ======= ====== ======== ======== ======== ======= =======
<FN>
---------------------------------------------------------------------------------------------------------------------------
<F1> Principally the Americas other than the United States, but also includes operations that cannot meaningfully be associated
with specific geographic areas (for example, shipping containers used on ocean-going vessels).
<F2> Not applicable.
---------------------------------------------------------------------------------------------------------------------------
=====================================================
30 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, 1996 or 1995. 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 GUARANTEES. 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 65
[Enlarge/Download Table]
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS 1996 1995
--------------------------------------------- --------------------------------------------
Assets (liabilities) Assets (liabilities)
-------------------------------- --------------------------------
Carrying Estimated fair value Carrying Estimated fair value
Notional amount -------------------- Notional amount --------------------
December 31 (In millions) amount (net) High Low amount (net) High Low
-----------------------------------------------------------------------------------------------------------------------------------
GE
Investments $<F1> $ 1,675 $ 3,127 $ 3,127 $<F1> $ 1,796 $ 2,886 $ 2,886
Borrowings and related instruments
Borrowings <F2><F3> <F1> (4,049) (4,058) (4,058) <F1> (3,943) (3,981) (3,981)
Interest rate swaps 536 -- (11) (11) 89 -- (16) (16)
Currency swaps 180 -- 25 25 180 -- 50 50
Financial guarantees 1,805 -- -- -- 1,722 -- -- --
Other firm commitments
Currency forwards and options 5,476 70 150 150 3,774 -- 131 131
Financing commitments 1,554 -- -- -- 1,505 -- -- --
GECS
Assets
Time sales and loans <F1> 60,859 61,632 60,544 <F1> 57,817 59,188 58,299
Integrated interest rate swaps 4,376 -- 91 91 1,703 -- (93) (93)
Purchased options 1,938 11 12 12 1,213 24 11 11
Mortgage-related positions
Mortgage purchase commitments 1,193 -- 2 2 1,360 -- 17 17
Mortgage sale commitments 1,417 -- 3 3 1,334 -- (11) (11)
Memo: mortgages held
for sale <F4> <F1> 1,112 1,165 1,165 <F1> 1,663 1,663 1,663
Options, including "floors" 27,422 78 81 81 18,522 67 144 144
Interest rate swaps and futures 1,731 -- (29) (29) 1,990 -- 31 31
Other cash financial instruments <F1> 3,352 3,900 3,652 <F1> 3,527 3,973 3,711
Liabilities
Borrowings and related
instruments
Borrowings <F2><F3> <F1> (125,621) (125,648) (125,648) <F1> (111,598) (112,553) (112,553)
Interest rate swaps 34,491 -- (575) (575) 29,881 -- (630) (630)
Currency swaps 25,623 -- 337 337 22,342 -- 937 937
Purchased options 1,882 10 1 1 2,751 26 12 11
Other -- -- -- -- 515 -- (65) (65)
Annuity and investment contract
benefits <F1> (20,210) (19,953) (19,953) <F1> (14,007) (13,734) (13,734)
Separate accounts <F1> (3,516) (3,516) (3,516) <F1> -- -- --
Insurance-- financial guarantees
and credit life 170,402 (3,801) (3,614) (4,025) 144,036 (1,570) (832) (922)
Credit and liquidity support
-- securitizations 6,842 (73) (9) (9) 7,035 (58) (65) (65)
Performance guarantees
-- principally letters
of credit 3,470 (55) (132) (133) 2,920 (48) (78) (78)
Other 2,901 (1,560) (1,175) (1,176) 3,556 (302) (36) (45)
Other firm commitments
Currency forwards 7,988 -- 75 74 7,657 -- 69 69
Currency swaps 99 -- (7) (7) 280 -- (22) (22)
Ordinary course of business
lending commitments 4,950 -- (27) (27) 6,929 -- (60) (60)
Unused revolving credit lines
Commercial 3,375 -- -- -- 3,223 -- -- --
Consumer -- principally
credit cards 116,878 -- -- -- 118,710 -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Not applicable.
<F2> Includes interest rate and currency swaps.
<F3> See note 19.
<F4> Included in other cash financial instruments.
-----------------------------------------------------------------------------------------------------------------------------------
Additional information about certain financial instruments in the table above
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.
F-40
ANNUAL REPORT PAGE 66
OPTIONS AND INSTRUMENTS CONTAINING OPTION FEATURES that behave based on limits
("caps," "floors" or "collars") on interest rate movement are used to hedge
prepayment risk in certain GECS business activities, such as the mortgage
servicing and annuities businesses.
SWAPS OF INTEREST RATES AND CURRENCIES are used by GE and GECS to optimize
borrowing costs for a particular funding strategy (see note 19). In addition,
swaps, along with purchased options and futures, are used by GECS to establish
specific hedges of mortgage-related assets and to manage net investment
exposures. Credit risk of these positions is evaluated by management under the
credit criteria discussed below. As part of its ongoing customer activities,
GECS also enters into swaps that are integrated into 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 position.
COUNTERPARTY CREDIT RISK -- risk that counterparties will be financially unable
to make payments according to the terms of the agreements -- is the principal
risk associated with swaps, purchased options and forwards. Gross market value
of probable future receipts is one way to measure this risk, but is meaningful
only in the context of net credit exposure to individual counterparties. At
December 31, 1996 and 1995, this gross market risk amounted to $0.9 billion and
$1.3 billion, respectively. Aggregate fair values that represent associated
probable future obligations, normally associated with a right of offset against
probable future receipts, amounted to $0.7 billion at both year-end 1996 and
1995.
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.
====================================================
31 QUARTERLY INFORMATION (UNAUDITED)
[Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------------------------------
First quarter Second quarter Third quarter Fourth quarter
(Dollar amounts in millions; ------------------ ------------------ ------------------ ------------------
per-share amounts in dollars) 1996 1995 1996 1995 1996 1995 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED OPERATIONS
Net earnings $ 1,517 $ 1,372 $ 1,908 $ 1,726 $ 1,788 $ 1,610 $ 2,067 $ 1,865
Net earnings per share 0.91 0.81 1.15 1.02 1.08 0.96 1.26 1.12
SELECTED DATA
GE
Sales of goods and services 9,742 9,278 11,520 11,237 11,478 10,106 13,379 12,392
Gross profit from sales 2,781 2,567 3,475 3,219 3,060 2,794 3,784 3,340
GECS
Revenues from operations 7,245 5,754 7,457 6,415 8,449 7,099 9,562 7,224
Operating profit 973 826 951 818 1,179 1,048 945 828
------------------------------------------------------------------------------------------------------------------------------------
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.
Earnings-per-share amounts for each quarter are required to be computed
independently and, as a result, their sum does not equal the total year
earnings-per-share amount for 1995.
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, 1994 $198 (a) $109
Provisions charged to operations 55 11
Write-offs (10) (56)
---- ----
Balance, December 31, 1994 $243 (a) $64
Provisions charged to operations 57 27
Write-offs (39) (3)
---- ---
Balance, December 31, 1995 $261 (a) $ 88
Provisions charged to Operations 99 3
Write-offs (92) (16)
--- ----
Balance, December 31, 1996 $268 $ 75
==== ====
-------------------------------------
(a) The year-end balance is segregated on the Statement of Financial Position
as follows:
1996 1995 1994
----- ----- ----
Current receivables $240 $231 $205
All other assets (long-term receivables,
customer financing, etc.) 28 30 38
--- --- ---
$268 $261 $243
==== ==== ====
Reference is made to note 8 in Notes to Consolidated Financial Statements
appearing in the 1996 Annual Report to Share Owners, which contains information
with respect to GECS allowance for losses on financing receivables for 1996,
1995 and 1994.
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|---|
F-42
Appendix
Differences between the Circulated
Material and the Material
in Electronic Format
The financial information included on pages F-1 through F-40 represents
the financial information that appears in the 1996 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 grey-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 27) 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 28-29, 30-31 AND 32-33 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-8, F-9, F-12, F-13, F-14, F-15, F-16, F-17 and F-18
(Annual Report pages 27, 34, 35, 39, 40, 41, 42, 43 and 44) of the electronic
format the word "Chart:" appears in a number of instances above a description of
the chart. This formulation indicates that in the circulated Annual Report there
appears a colored 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 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 grey numerals 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 46 (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 46, signed by
facsimile, does not refer to the schedule identified solely with the 10-K.
Dates Referenced Herein and Documents Incorporated by Reference
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