EXHIBIT "B"
Case 2:03-cv-01587-JAT Document 81-3 Filed 06/27/2006 Page 1 of 32
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 1-6461 GENERAL ELECTRIC CAPITAL CORPORATION (Exact name of registrant as specified in its charter) Delaware
(State or other jurisdiction of incorporation or organization)
13-1500700
(I.R.S. Employer Identification No.)
260 Long Ridge Road, Stamford, CT
(Address of principal executive offices)
06927
(Zip Code)
(Registrant's telephone number, including area code) (203) 357-4000
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act). Yes
At April 25, 2006, 3,985,403 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $14 per share were outstanding. REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.
(1)
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General Electric Capital Corporation
Part I Financial Information Item 1. Financial Statements Condensed Statement of Current and Retained Earnings Condensed Statement of Financial Position Condensed Statement of Cash Flows Notes to Condensed, Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 4. Controls and Procedures Part II Other Information Item 6. Exhibits Signatures
Page
3 4 5 6 12 20
20 21
Forward-Looking Statements This document contains "forward-looking statements" that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
(2)
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Part I. Financial Information Item 1. Financial Statements General Electric Capital Corporation and consolidated affiliates Condensed Statement of Current and Retained Earnings (Unaudited) Three months ended March 31 2006 2005
(In millions)
Revenues Revenues from services (note 3) Sales of goods Total revenues Costs and expenses Interest Operating and administrative Cost of goods sold Investment contracts, insurance losses and insurance annuity benefits Provision for losses on financing receivables Depreciation and amortization Minority interest in net earnings of consolidated affiliates Total costs and expenses Earnings from continuing operations before income taxes Provision for income taxes Earnings from continuing operations Earnings from discontinued operations, net of taxes (note 2) Net earnings Dividends Retained earnings at beginning of period Retained earnings at end of period
The notes to condensed, consolidated financial statements are an integral part of this statement.
$
13,248 555 13,803
$
12,120 674 12,794
4,024 4,166 513 148 825 1,486 94 11,256 2,547 (321 ) 2,226 128 2,354 (4,749 ) 35,927 33,532
3,358 4,051 635 202 928 1,621 21 10,816 1,978 (150) 1,828 249 2,077 (239) 34,947 36,785
$
$
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General Electric Capital Corporation and consolidated affiliates Condensed Statement of Financial Position
(In millions)
March 31, 2006 (Unaudited) $ 5,892 21,491 161 282,556 26,475 51,220 23,119 52,021 14,520 477,455
December 31, 2005
Assets Cash and equivalents Investment securities Inventories Financing receivables net (note 4) Other receivables Buildings and equipment, less accumulated amortization of $21,454 and $21,271 Intangible assets net (note 5) Other assets Assets of discontinued operations (note 2) Total assets Liabilities and equity Borrowings (note 6) Accounts payable Investment contracts, insurance liabilities and insurance annuity benefits Other liabilities Deferred income taxes Liabilities of discontinued operations (note 2) Total liabilities Minority interest in equity of consolidated affiliates Capital stock Accumulated gains (losses) net Investment securities Currency translation adjustments Cash flow hedges Minimum pension liabilities Additional paid-in capital Retained earnings Total shareowner's equity Total liabilities and equity
$
5,996 18,467 159 284,567 25,250 50,936 23,086 49,521 17,291 475,273
$
$
$
359,920 13,941 12,638 15,221 11,963 13,753 427,436 2,260 56 581 2,044 (491) (157) 12,194 33,532 47,759 477,455
$
355,885 14,345 12,094 16,269 11,085 13,195 422,873 2,212 56 744 2,343 (790) (147) 12,055 35,927 50,188 475,273
$
$
The sum of accumulated gains (losses) on investment securities, currency translation adjustments, cash flow hedges and minimum pension liabilities constitutes "Accumulated nonowner changes other than earnings," and was $1,977 million and $2,150 million at March 31, 2006 and December 31, 2005, respectively. The notes to condensed, consolidated financial statements are an integral part of this statement.
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General Electric Capital Corporation and consolidated affiliates Condensed Statement of Cash Flows (Unaudited)
(In millions)
Three months ended March 31 2006 2005
Cash flows operating activities Net earnings Earnings from discontinued operations Adjustments to reconcile net earnings to cash provided from operating activities Depreciation and amortization of buildings and equipment Decrease in accounts payable Provision for losses on financing receivables All other operating activities Cash from operating activities continuing operations Cash from operating activities discontinued operations Cash from operating activities Cash flows investing activities Additions to buildings and equipment Dispositions of buildings and equipment Increase in loans to customers Principal collections from customers loans Investment in equipment for financing leases Principal collections from customers financing leases Net change in credit card receivables Payments for principal businesses purchased All other investing activities Cash used for investing activities continuing operations Cash from (used for) investing activities discontinued operations Cash used for investing activities Cash flows financing activities Net decrease in borrowings (maturities of 90 days or less) Newly issued debt: Short-term (91 to 365 days) Long-term (longer than one year) Non-recourse, leveraged lease Repayments and other debt reductions: Short-term (91 to 365 days) Long-term (longer than one year) Non-recourse, leveraged lease Dividends paid to shareowner All other financing activities Cash from (used for) financing activities continuing operations Cash used for financing activities discontinued operations Cash from (used for) financing activities Decrease in cash and equivalents Cash and equivalents at beginning of year Cash and equivalents at March 31 Less cash and equivalents of discontinued operations at March 31 Cash and equivalents of continuing operations at March 31
The notes to condensed, consolidated financial statements are an integral part of this statement.
$
2,354 (128 ) 1,486 (153 ) 825 (1,115 ) 3,269 33 3,302
$
2,077 (249) 1,621 (210) 928 1,555 5,722 814 6,536
(2,038 ) 1,047 (70,707 ) 65,213 (5,766 ) 5,878 3,506 (424 ) (1,167 ) (4,458 ) 7 (4,451 )
(2,407) 1,709 (75,616) 74,213 (5,209) 5,712 1,923 (4,631) (480) (4,786) (214) (5,000)
(2,471 ) 316 24,177 73 (14,051 ) (2,510 ) (382 ) (4,609 ) 542 1,085 (28 ) 1,057 (92 ) 6,182 6,090 198 5,892
(3,766) 401 22,881 47 (14,667) (5,632) (504) (239) (297) (1,776) (613) (2,389) (853) 9,840 8,987 1,484 7,503
$
$
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Notes to Condensed, Consolidated Financial Statements (Unaudited) 1. Our financial statements are prepared in conformity with the U.S. generally accepted accounting principles (GAAP). Preparing financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. We reclassified certain prior-period amounts to conform to the current period's presentation. All of our outstanding common stock is owned by General Electric Capital Services, Inc. (GE Capital Services or GECS), all of whose common stock is owned, directly or indirectly, by General Electric Company (GE Company or GE). Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations. Our financial statements consolidate all of our affiliates companies that we control and in which we hold a majority voting interest. Details of total revenues and segment profit by operating segment can be found on page 14 of this report. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on a Saturday. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports. 2. At March 31, 2006, we classified GE Life and Genworth Financial, Inc. (Genworth) as discontinued operations. Associated results of operations, financial position and cash flows are separately reported for all periods presented. Planned sale of GE Life In March 2006, we initiated a plan to sell GE Life, our U.K.-based life insurance operation. GE Life's assets were $14,520 million at March 31, 2006; its first quarter 2006 revenues were $799 million; and its first quarter 2006 earnings were insignificant. We have provided for a pre-tax loss of $210 million ($175 million after tax) based on our best estimate of sales proceeds. We anticipate selling GE Life by March 31, 2007. Completed sale of Genworth In March 2006, we completed the sale of our remaining 18% investment in Genworth through a secondary public offering of 71 million shares of Class A Common Stock and direct sale to Genworth of 15 million shares of Genworth Class B Common Stock. As a result, we recognized a pre-tax gain of $516 million ($300 million after tax). Summarized financial information for discontinued operations is set forth below. Gain on disposal included both actual (Genworth) and estimated (GE Life) effects.
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(In millions)
Three months ended March 31 2006 2005 $ $
Discontinued operations before disposal Revenues from services Earnings from discontinued operations before minority interest and income taxes Minority interest Earnings from discontinued operations before income taxes Income tax expense Earnings from discontinued operations before disposal, net of taxes Disposal Gain on disposal before income taxes Income tax expense Gain on disposal, net of taxes Earnings from discontinued operations, net of taxes
803
3,210
$
7 7 (4) 3
$
487 99 388 (225 ) 163
$
$
$ $ $
306 (181) 125 128
$ $ $
156 (70 ) 86 249
At
(In millions)
3/31/06 $ $
12/31/05
Assets Cash and equivalents Investment securities Other receivables Other Assets of discontinued operations Liabilities and equity Investment contracts, insurance liabilities and insurance annuity benefits Other Liabilities of discontinued operations Total accumulated nonowner changes other than earnings
$
198 11,389 370 2,563 14,520
$
186 13,977 435 2,693 17,291
$ $ $
12,604 1,149 13,753 186
$ $ $
12,335 860 13,195 633
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3. Revenues from services are summarized in the following table. Three months ended March 31 2006 2005 $ 5,273 2,885 291 968 987 2,844 13,248 $ 4,838 2,730 291 841 1,010 2,410 12,120
(In millions)
Interest on loans Operating lease rentals Investment income Fees Financing leases Other income Total
$
$
4. Financing receivables net, consisted of the following. At
(In millions)
3/31/06 $ 224,317 62,722 287,039 (4,483) $ 282,556
12/31/05 $ 226,113 63,024 289,137 (4,570 ) $ 284,567
Loans, net of deferred income Investment in financing leases, net of deferred income Less allowance for losses Financing receivables net
Included in the above are the financing receivables of consolidated, liquidating securitization entities as follows: At
(In millions)
3/31/06 $ 14,755 131 14,886 (22) 14,864 $
12/31/05 15,868 769 16,637 (22 ) 16,615
Loans, net of deferred income Investment in financing leases, net of deferred income Less allowance for losses Financing receivables net
$
$
5. Intangible assets net, consisted of the following. At
(In millions)
3/31/06 $ $ 21,200 1,919 23,119 $ $
12/31/05 21,161 1,925 23,086
Goodwill Intangible assets subject to amortization Total
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First quarter 2006 changes in goodwill balances follow.
2006 GE Commercial Finance GE Consumer Finance GE Industrial(a) GE Infrastructure(a)
(In millions)
Total
Balance January 1 Acquisitions/purchase accounting adjustments Currency exchange and other Balance March 31
$ 10,445 85 (11) $ 10,519
$ 9,184 53 (82) $ 9,155
$ 1,406 (3) (3) $ 1,400
$
126 126
$ 21,161 135 (96) $ 21,200
$
(a) Included only portions of the segment that are financial services businesses.
The amount of goodwill related to new acquisitions recorded during the first quarter of 2006 was $68 million. During 2006, we increased goodwill associated with previous acquisitions by $67 million. Intangible Assets Subject to Amortization At 3/31/06 Gross carrying amount 1,501 479 1,828 3,808 Accumulated amortization $ (822) (277) (790) (1,889) $ Net 679 202 1,038 1,919 Gross carrying amount $ 1,453 495 1,774 3,722 12/31/05 Accumulated amortization (784) (272) (741) $ (1,797) $ $ Net 669 223 1,033 1,925
(In millions)
Capitalized software $ Patents, licenses and trademarks All other Total $
$
$
$
$
Amortization expense related to intangible assets subject to amortization was $111 million and $96 million for the quarters ended March 31, 2006 and 2005, respectively.
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6. Borrowings are summarized in the following table. At
(In millions)
3/31/06
12/31/05
Short-Term Borrowings Commercial paper U.S. Unsecured Asset-backed(a) Non-U.S. Current portion of long-term debt(b)(c) Other Total Long-Term Borrowings Senior notes Unsecured Asset-backed(d) Extendible notes(e) Subordinated notes(f) Total Total borrowings
(a) Entirely obligations of consolidated, liquidating securitization entities. See note 8. (b) Included short-term borrowings by consolidated, liquidating securitization entities of $732 million and $697 million at March 31, 2006 and December 31, 2005, respectively. See note 8. (c) Included $250 million of subordinated notes guaranteed by GE at both March 31, 2006, and December 31, 2005. (d) Asset-backed senior notes were all issued by consolidated, liquidating securitization entities. See note 8. (e) Included $38 million of obligations of consolidated, liquidating securitization entities at December 31, 2005. See note 8. (f) Included $450 million of subordinated notes guaranteed by GE at both March 31, 2006, and December 31, 2005.
$
54,941 8,157 24,870 38,648 17,392 144,008
$
60,640 9,267 20,456 41,744 17,572 149,679
193,363 5,899 13,984 2,666 215,912 $ 359,920
182,654 6,845 14,022 2,685 206,206 $ 355,885
7. A summary of increases (decreases) in shareowner's equity that did not result directly from transactions with the shareowner, net of income taxes, follows. Three months ended March 31 2006 2005 $ 2,354 (163) (299) 299 (10) 2,181 $ 2,077 (402) 233 418 (6) 2,320
(In millions)
Net earnings Investment securities net Currency translation adjustments net Cash flow hedges net Minimum pension liabilities net Total
$
$
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8. We securitize financial assets in the ordinary course of business to improve shareowner returns. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improving returns, these securitization transactions serve as funding sources for a variety of diversified lending and securities transactions. Historically, we have used both GE-supported and third-party entities to execute securitization transactions funded in the commercial paper and term bond markets. Securitized assets that are on-balance sheet include assets consolidated upon adoption of Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, as amended. Although we do not control these entities, consolidation was required because we provided a majority of the credit and liquidity support for their activities. A majority of these entities were established to issue asset-backed securities, using assets that were sold by us and by third parties. These entities differ from others included in our consolidated financial statements because the assets they hold are legally isolated and are unavailable to us under any circumstances. Repayment of their liabilities depends primarily on cash flows generated by their assets. Because we have ceased transferring assets to these entities, balances will decrease as the assets repay. We refer to these entities as "consolidated, liquidating securitization entities." The following table represents assets in securitization entities, both consolidated and off-balance sheet. At
(In millions)
3/31/06
12/31/05
Receivables secured by: Equipment Commercial real estate Residential real estate Other assets Credit card receivables Total securitized assets
$
$
11,309 10,786 8,083 13,079 10,973 54,230
$
$
12,949 11,437 8,882 12,869 10,039 56,176
At
(In millions)
3/31/06 $ $ 38,377 15,853 54,230 $ $
12/31/05 38,272 17,904 56,176
Off-balance sheet(a)(b) On-balance sheet(c) Total securitized assets
(a) At March 31, 2006 and December 31, 2005, liquidity support amounted to $2,159 million and $1,931 million, respectively. These amounts are net of $2,308 million and $2,450 million, respectively, participated or deferred beyond one year. Credit support amounted to $4,051 million and $4,386 million at March 31, 2006 and December 31, 2005, respectively. (b) Liabilities for recourse obligations related to off-balance sheet assets were $63 million and $93 million at March 31, 2006 and December 31, 2005, respectively. (c) At March 31, 2006 and December 31, 2005, liquidity support amounted to $8,768 million and $10,044 million, respectively. These amounts are net of $34 million and $138 million, respectively, participated or deferred beyond one year. Credit support amounted to $3,893 million and $4,780 million at March 31, 2006 and December 31, 2005, respectively.
The portfolio of financing receivables consisted of loans and financing lease receivables secured by equipment, commercial and residential real estate and other assets; and credit card receivables. Examples of these assets include loans and leases on manufacturing and transportation equipment, loans on commercial property, commercial loans,
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and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base. Assets in consolidated, liquidating securitization entities are shown in the following captions in the Condensed Statement of Financial Position. At
(In millions)
3/31/06 $ $ 14,864 989 15,853 $ $
12/31/05 16,615 1,289 17,904
Financing receivables net (note 4) Other Total
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations A. Results of Operations In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission (SEC) rules. For such measures, we have provided supplemental explanations and reconciliations in Exhibit 99 to this report on Form 10-Q. Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations simply as "revenues" and "earnings" throughout this Management's Discussion and Analysis. Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated. Overview Revenues for the first quarter of 2006 were $13.8 billion, a $1.0 billion (8%) increase over the first quarter of 2005. Revenues for the first quarters of 2006 and 2005 included $0.4 billion and $0.1 billion of revenue from acquisitions, respectively, and in 2006 were reduced by $0.3 billion as a result of dispositions. Revenues also increased $0.9 billion compared with the first quarter of 2005 as a result of organic revenue growth, partially offset by the strengthening U.S. dollar. Organic revenue growth excludes the effects of acquisitions, business dispositions (other than dispositions of businesses acquired for investment) and currency exchange rates. Earnings were $2.2 billion, up 22% from $1.8 billion in the first quarter of 2005. Overall, acquisitions contributed $0.4 billion and $1.0 billion to total revenues in the first quarters of 2006 and 2005, respectively. Our total net earnings in each of the first quarters of 2006 and 2005 included approximately $0.1 billion from acquired businesses. We integrate acquisitions as quickly as possible. Only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses. Dispositions also affected our operations through lower revenues of $0.3 billion and $0.1 billion in the first quarters of 2006 and 2005, respectively. The effect on earnings was inconsequential in each of the first quarters of 2006 and 2005. The provision for income taxes was $0.3 billion for the first quarter of 2006 (effective tax rate of 12.6%), compared with $0.2 billion for the first quarter of 2005 (effective tax rate of 7.6%). The tax rate increased primarily
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as a result of the absence of the one-time benefit that resulted from the 2005 reorganization of our foreign aircraft leasing operations, partially offset by growth in lower-taxed earnings from global operations. Segment Operations Operating segments comprise our four businesses focused on the broad markets they serve: GE Commercial Finance, GE Consumer Finance, GE Industrial and GE Infrastructure. For segment reporting purposes, certain financial services businesses are included in the industrial operating segments that actively manage such businesses and report their results for internal performance measurement purposes. These include Aviation Financial Services, Energy Financial Services and Transportation Finance reported in the GE Infrastructure segment, and Equipment Services reported in the GE Industrial segment. GECC corporate items and eliminations include the effects of eliminating transactions between operating segments; results of our insurance activities remaining in continuing operations; results of liquidating businesses such as consolidated, liquidating securitization entities; underabsorbed corporate overhead; certain non-allocated amounts determined by the Chief Executive Officer; and a variety of sundry items. GECC corporate items and eliminations is not an operating segment. Rather, it is added to operating segment totals to reconcile to consolidated totals on the financial statements. The Chief Executive Officer allocates resources to, and assesses the performance of operations at the consolidated GE-level. GECC operations are a portion of those segments. We present below in their entirety the four GE segments that include financial services operations. We also provide a one-line reconciliation to GECC-only results, the most significant component of which is the elimination of GE businesses that are not financial services businesses. In addition to providing information on GE segments in their entirety, we have also provided supplemental information for certain businesses within the GE segments. Our Chief Executive Officer does not separately assess the performance of, or allocate resources among, these product lines. Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business in a given period. In connection with that assessment, the Chief Executive Officer may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment's management is measured excluded in determining segment profit, which we refer to as "operating profit," for GE Healthcare, GE NBC Universal and the industrial businesses of the GE Industrial and GE Infrastructure segments; included in determining segment profit, which we refer to as "net earnings," for GE Commercial Finance, GE Consumer Finance, and the financial services businesses of the GE Industrial segment (Equipment Services) and the GE Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance). In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments.
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Summary of Operating Segments Three months ended March 31 (Unaudited) 2006 2005
(In millions)
Revenues GE Commercial Finance GE Consumer Finance GE Industrial GE Infrastructure Total segment revenues GECC corporate items and eliminations(a) Total revenues Less portion of GE revenues not included in GECC Total revenues in GECC Segment profit GE Commercial Finance GE Consumer Finance GE Industrial GE Infrastructure Total segment profit GECC corporate items and eliminations Less portion of GE segment profit not included in GECC Earnings in GECC from continuing operations Earnings in GECC from discontinued operations, net of taxes Total net earnings in GECC
$
5,484 5,090 8,140 10,152 28,866 474 29,340 (15,537) $ 13,803
5,072 4,689 7,668 9,374 26,803 524 27,327 (14,533 ) $ 12,794
$
$
$
1,174 836 600 1,703 4,313 (46) (2,041) 2,226 128 2,354
$
$
926 735 526 1,540 3,727 (32 ) (1,867 ) 1,828 249 2,077
(a) Primarily revenues associated with our insurance activities remaining in continuing operations that were previously reported in the GE Commercial Finance segment.
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GE Commercial Finance Three months ended March 31 2006 2005 $ $ $ $ 5,484 (179) 5,305 1,174 (81) 1,093 $ $ $ $ 5,072 (151 ) 4,921 926 (77 ) 849
(In millions)
Revenues Less portion of GE Commercial Finance not included in GECC Total revenues in GECC Segment profit Less portion of GE Commercial Finance not included in GECC Total segment profit in GECC
(In millions)
3/31/06 $ 195,209 (1,880) $ 193,329
At 3/31/05 $ 187,626 1,490 $ 189,116
12/31/05 $ 190,546 (1,408) $ 189,138
Total assets Less portion of GE Commercial Finance not included in GECC Total assets in GECC
(In millions)
Three months ended March 31 2006 2005
Revenues in GE Capital Solutions Real Estate Segment profit in GE Capital Solutions Real Estate
$
2,820 1,075
$
2,889 898
$
339 441
$
286 310
(In millions)
3/31/06
At 3/31/05
12/31/05
Assets in GE Capital Solutions Real Estate
$
88,661 37,566
$
86,230 36,299
$
87,306 35,323
GE Commercial Finance revenues and net earnings increased 8% and 27%, respectively, compared with the first quarter of 2005. Revenues for the first quarters of 2006 and 2005 included $0.2 billion and $0.1 billion from acquisitions, respectively, and in 2006 were reduced by $0.2 billion as a result of dispositions. Revenues for the quarter also increased $0.4 billion compared with the first quarter of 2005 as a result of organic revenue growth ($0.5 billion), partially offset by the strengthening U.S. dollar ($0.1 billion). The increase in net earnings resulted primarily from core growth ($0.2 billion), including growth in lower-taxed earnings from global operations.
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GE Consumer Finance Three months ended March 31 2006 2005 $ $ $ $ 5,090 5,090 836 (23) 813 $ $ $ $ 4,689 4,689 735 (4 ) 731
(In millions)
Revenues Less portion of GE Consumer Finance not included in GECC Total revenues in GECC Segment profit Less portion of GE Consumer Finance not included in GECC Total segment profit in GECC
(In millions)
3/31/06 $ 158,508 749 $ 159,257
At 3/31/05 $ 149,912 (768 ) $ 149,144
12/31/05 $ 158,829 763 $ 159,592
Total assets Less portion of GE Consumer Finance not included in GECC Total assets in GECC
GE Consumer Finance revenues and net earnings increased 9% and 14%, respectively, compared with the first quarter of 2005. Revenues for the first quarter of 2006 included $0.2 billion from acquisitions. Revenues for the quarter also increased $0.2 billion compared with the first quarter of 2005 as a result of organic revenue growth ($0.4 billion), partially offset by the strengthening U.S. dollar ($0.2 billion). The increase in net earnings resulted primarily from acquisitions ($0.1 billion). GE Industrial Three months ended March 31 2006 2005 $ $ $ $ 8,140 (6,506) 1,634 600 (584) 16 $ $ $ $ 7,668 (6,094 ) 1,574 526 (516 ) 10
(In millions)
Revenues Less portion of GE Industrial not included in GECC Total revenues in GECC Segment profit Less portion of GE Industrial not included in GECC Total segment profit in GECC Revenues in GE Consumer & Industrial Equipment Services Plastics Segment profit in GE Consumer & Industrial Equipment Services Plastics
$
3,534 1,634 1,644
$
3,261 1,574 1,648
$
220 16 225
$
165 10 240
(16)
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GE Industrial revenues rose 6%, or $0.5 billion, in the first quarter of 2006 as higher volume ($0.5 billion) was partially offset by the strengthening U.S. dollar ($0.1 billion) at the industrial businesses in the segment. The increase in volume was primarily at Consumer & Industrial and at Security which acquired Edwards Systems Technology late in the first quarter of 2005. Revenues at Equipment Services also increased as a result of organic revenue growth ($0.1 billion). Segment profit rose 14%, or $0.1 billion, in the first quarter of 2006 as productivity ($0.2 billion), primarily at Consumer & Industrial and Plastics, was partially offset by higher material and other costs ($0.1 billion), primarily at Consumer & Industrial. Segment profit was unaffected by price as higher prices at Consumer & Industrial offset lower prices at Plastics. GE Infrastructure Three months ended March 31 2006 2005 $ $ $ $ 10,152 (8,852) 1,300 1,703 (1,353) 350 $ $ $ $ 9,374 (8,288 ) 1,086 1,540 (1,270 ) 270
(In millions)
Revenues Less portion of GE Infrastructure not included in GECC Total revenues in GECC Segment profit Less portion of GE Infrastructure not included in GECC Total segment profit in GECC Revenues in GE Aviation Aviation Financial Services Energy Energy Financial Services Oil & Gas Transportation Segment profit in GE Aviation Aviation Financial Services Energy Energy Financial Services Oil & Gas Transportation
$
3,041 934 3,835 301 772 1,023
$
2,590 817 3,951 228 641 756
$
645 206 436 117 55 204
$
527 163 577 94 27 82
GE Infrastructure revenues increased 8%, or $0.8 billion, in the first quarter of 2006 as higher volume ($0.8 billion) was partially offset by the strengthening U.S. dollar ($0.1 billion) and lower prices ($0.1 billion) at the industrial businesses of the segment. The increase in volume reflects increased sales of commercial and military services and commercial engines at Aviation and increased locomotive sales at Transportation, partially offset by lower sales at Energy. Energy sold 21 large heavy-duty gas turbines in the first quarter of 2006, compared with 34 in the corresponding period of 2005. Revenues also increased as a result of organic revenue growth at Aviation Financial Services ($0.1 billion) and Energy Financial Services ($0.1 billion).
(17)
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Segment profit rose 11%, or $0.2 billion, as productivity ($0.2 billion) and higher volume ($0.1 billion) were partially offset by higher material and other costs ($0.1 billion) and lower prices ($0.1 billion) at the industrial businesses of the segment. We realized productivity improvements at Transportation and Aviation. Volume increases were primarily at Aviation. Segment profit from the financial services businesses increased $0.1 billion as a result of core growth at Aviation Financial Services and Energy Financial Services, despite the absence of a 2006 counterpart to the 2005 one-time benefits from our aircraft leasing reorganization. Discontinued Insurance Operations Three months ended March 31 2006 2005 $ 128 $ 249
(In millions)
Earnings in GECC from discontinued operations, net of taxes
In 2006, we continue to reduce our exposure to insurance in a disciplined fashion. In March 2006, we initiated a plan to sell GE Life, our U.K.-based life insurance operation. We have provided for a pre-tax loss of $0.2 billion ($0.2 billion after tax) based on our best estimate of sales proceeds. We anticipate selling GE Life by March 31, 2007. In March 2006, we completed the sale of our remaining 18% investment in Genworth Financial, Inc. (Genworth) through a secondary public offering of 71 million shares of Class A Common Stock and direct sale to Genworth of 15 million shares of Genworth Class B Common Stock. As a result, we recognized a pre-tax gain of $0.5 billion ($0.3 billion after tax). Discontinued operations comprise GE Life, our U.K.-based life insurance operation and Genworth, our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations. Results of these businesses are reported as discontinued operations for all periods presented. Earnings from discontinued operations net of taxes for the first quarter of 2006 reflected the gain on the sale of our remaining 18% investment in Genworth common stock ($0.3 billion), partially offset by the estimated loss on the planned sale of GE Life ($0.2 billion). GE Life results will be included in our discontinued operations until a transaction is completed. We anticipate selling GE Life by March 31, 2007. Earnings from discontinued operations net of taxes for the first quarter of 2005 reflected our share of Genworth 2005 earnings from operations ($0.2 billion) and the gain related to Genworth's secondary public offering ($0.1 billion). B. Statement of Financial Position Overview of Financial Position Major changes in our financial position resulted from the following: · During the first quarter of 2006, we completed the sale of our remaining 18% investment in Genworth common stock and we initiated a plan to sell GE Life. We have separately reported the assets and liabilities related to these discontinued operations for all periods presented.
(18)
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·
The U.S. dollar was stronger at March 31, 2006, than it was at December 31, 2005, reducing the translated levels of our non-U.S. dollar assets and liabilities.
Investment securities comprise mainly available-for-sale investment-grade debt securities supporting obligations to annuitants and policyholders. We regularly review investment securities for impairment based on criteria that include the extent to which cost exceeds market value, the duration of that market decline, our intent and ability to hold to recovery and the financial health and specific prospects for the issuer. Of available-for-sale securities with unrealized losses at March 31, 2006, an inconsequential amount was at risk of being charged to earnings in the next 12 months. Impairment losses were inconsequential for each of the first quarters of 2006 and 2005. Financing receivables is our largest category of assets and represents one of our primary sources of revenues. The portfolio of financing receivables, before allowance for losses, was $287.0 billion at March 31, 2006, and $289.1 billion at December 31, 2005. The related allowance for losses at March 31, 2006, amounted to $4.5 billion compared with $4.6 billion at December 31, 2005, representing our best estimate of probable losses inherent in the portfolio. A discussion of the quality of certain elements of the financing receivables portfolio follows. For purposes of that discussion, "delinquent" receivables are those that are 30 days or more past due; and "nonearning" receivables are those that are 90 days or more past due (or for which collection has otherwise become doubtful). Financing receivables, before allowance for losses, decreased $2.1 billion from December 31, 2005, primarily as a result of securitization and sales ($5.2 billion), loans transferred to assets held for sale ($1.1 billion) and the strengthening U.S. dollar ($0.9 billion), partially offset by core growth ($4.7 billion) and acquisitions ($1.1 billion). Related nonearning receivables were $4.2 billion at March 31, 2006, compared with $4.1 billion at year-end 2005, both representing 1.4% of outstanding receivables, respectively. This increase was primarily related to higher nonearning receivables in our European secured financing business at GE Consumer Finance, a business that tends to experience relatively higher delinquencies but lower losses than the rest of our consumer portfolio, partially offset by decreases in our U.S. portfolio resulting from an improving economic environment. Delinquency rates on managed GE Commercial Finance equipment loans and leases and managed GE Consumer Finance financing receivables follow. Delinquency rates at 3/31/06 (a) 12/31/05 GE Commercial Finance GE Consumer Finance
(a) Subject to update.
3/31/05 1.54% 5.18
1.31% 5.14
1.31% 5.08
Delinquency rates at GE Commercial Finance decreased from March 31, 2005, to March 31, 2006, primarily resulting from improved credit quality across all portfolios. Delinquency rates at GE Consumer Finance increased from December 31, 2005, to March 31, 2006, as a result of seasonality in consumer spending and higher delinquencies in our European secured financing business, discussed above, partially offset by decreases in our U.S. portfolio resulting from an improving economic environment. The decrease from March 31, 2005, to March 31, 2006, reflected improved economic conditions, partially offset by higher delinquencies in our European secured financing business, discussed above.
(19)
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C. Debt Instruments During the first quarter of 2006, GECC and GECC affiliates issued $24 billion of senior, unsecured long-term debt. This debt was both fixed and floating rate and was issued to institutional and retail investors in the U.S. and 13 other global markets. Maturities for these issuances ranged from one to forty years. We used the proceeds primarily for repayment of maturing long-term debt, but also to fund acquisitions and organic growth. We anticipate that we will issue between $31 billion and $41 billion of additional long-term debt during the remainder of 2006, mostly to repay maturing long-term debt. The ultimate amount we issue will depend on our needs and on the markets.
Item 4. Controls and Procedures Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls and procedures and internal control over financial reporting and concluded that (i) our disclosure controls and procedures were effective as of March 31, 2006, and (ii) no change in internal control over financial reporting occurred during the quarter ended March 31, 2006, that has materially affected, or is reasonably likely to materially affect, such internal control over financial reporting.
Part II. Other Information Item 6. Exhibits Exhibit 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.* Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended.* Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended.* Certification Pursuant to 18 U.S.C. Section 1350.* Financial Measures that Supplement Generally Accepted Accounting Principles.* * Filed electronically herewith.
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32 Exhibit 99
(20)
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. General Electric Capital Corporation (Registrant)
April 26, 2006 Date
/s/ Philip D. Ameen Philip D. Ameen Senior Vice President and Controller Duly Authorized Officer and Principal Accounting Officer
(21)
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Exhibit 12 General Electric Capital Corporation and consolidated affiliates Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Three months ended March 31, 2006 (Unaudited) Ratio of earnings to combined fixed charges and preferred stock dividends
Ratio of earnings to fixed charges
(Dollars in millions)
Earnings from continuing operations Provision for income taxes Minority interest Earnings from continuing operations before income taxes and minority interest Fixed charges: Interest One-third of rentals(a) Total fixed charges Less interest capitalized, net of amortization Earnings from continuing operations before income taxes and minority interest plus fixed charges Ratio of earnings to fixed charges Preferred stock dividend requirements Ratio of earnings before provision for income taxes to earnings from continuing operations Preferred stock dividend factor on pre-tax basis Fixed charges Total fixed charges and preferred stock dividend requirements Ratio of earnings to combined fixed charges and preferred stock dividends
(a) Considered to be representative of interest factor in rental expense.
$
2,226 321 94 2,641
$
2,226 321 94 2,641
4,077 80 4,157 (19)
4,077 80 4,157 (19)
$
6,779 1.63
$
6,779 1.63
$
1
1.14 1 4,157 $ 4,158 1.63
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Exhibit 31(a) Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended I, Jeffrey R. Immelt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 26, 2006 /s/ Jeffrey R. Immelt Jeffrey R. Immelt Chief Executive Officer
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Exhibit 31(b) Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Amended I, Keith S. Sherin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of General Electric Capital Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 26, 2006 /s/ Keith S. Sherin Keith S. Sherin Chief Financial Officer
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Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350
In connection with the Quarterly Report of General Electric Capital Corporation (the "registrant") on Form 10-Q for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "report"), we, Jeffrey R. Immelt and Keith S. Sherin, Chief Executive Officer and Chief Financial Officer, respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, that to our knowledge: (1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.
April 26, 2006
/s/ Jeffrey R. Immelt Jeffrey R. Immelt Chief Executive Officer
/s/ Keith S. Sherin Keith S. Sherin Chief Financial Officer
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Exhibit 99 Financial Measures that Supplement Generally Accepted Accounting Principles General Electric Capital Corporation and consolidated affiliates We sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission rules. Specifically, we have referred to delinquency rates on certain financing receivables of the GE Commercial Finance and GE Consumer Finance segments. The reasons we use this non-GAAP financial measure and its reconciliation to the most directly comparable GAAP financial measures follow. Delinquency Rates on Certain Financing Receivables GE Commercial Finance 3/31/06(a) Managed Off-book On-book GE Consumer Finance 3/31/06(a) Managed Off-book On-book
(a) Subject to update.
At 12/31/05 1.31% 0.76 1.53
3/31/05 1.54% 1.05 1.70
1.31% 0.61 1.60
At 12/31/05 5.08% 5.28 5.07
3/31/05 5.18% 4.94 5.20
5.14% 5.24 5.13
We believe that delinquency rates on managed financing receivables provide a useful perspective of our portfolio quality and are key indicators of financial performance. Further, investors use such information, including the results of both the on-book and securitized portfolios, which are relevant to our overall performance.
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