ML20210D722
| ML20210D722 | |
| Person / Time | |
|---|---|
| Site: | Vallecitos Nuclear Center, Vallecitos |
| Issue date: | 12/31/1985 |
| From: | Bossidy L, Cunningham G, Hood E, Welch J GENERAL ELECTRIC CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 8603270033 | |
| Download: ML20210D722 (62) | |
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i l l As we look to the next five years, our combination of different business cul-tures and shared values gives GE the ability and flexibility to win in - world markets. It provides the bond that stimulates our people, the most impor-tant asset of any organization, to pursue a common goal achieving excellence in everything we do. l l
- Centeels I
j 1 Financial Highlights l 2 Letter to Share Owners l 8 Strategic Businesses l Core Manufacturing j Technology ( Services i Support Operations 25 FinancialSection i 52 Board of Directors ( 55 Management j 59 Share Owner and Other Infbrmation
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Elecmr . s- na w.au 6 a :u:2.i+. n .,.uaau azar.- waw-w. a.. d ' ' e a.ww-a: a,s~w =~u-a ltrcent (Dollar amounts in millions; per-share amounts in dollars) 1985 1984 increase For the year' Sales S 28,285 $ 27,947 1% Net earnings 2,336 .2,280 2 i Pershare Net earnings S 5.13 $ 5.03 2% Dividends declared 2.23 2.05 9 Market price range 73 %-55 % 59W48% At year end Total capital invested $ 16,082 $ 14,502 11% Share owners' equity 13,904 12,573 11 Measurements Operating margin as a percentage of sales 10.4 % 10.2 % Earnings as a percentage of: Sales 8.3 8.2 Average share owners' equity 17.6 19.I Return on average total capital invested 16.5 17.9 Bormwings as a percentage of total capital 12.7 12.4 l l 1 ) 1 1
. _ . - _ _ _ )
To @ce Sharo @wncra . During the past five years, we've shared with you our assessment of the in-creasingly more competitive 1980s - and our strategy fi>r winning in this era of lQ greatly intensified worldwide competition. r In an environment of accelerated techno-f logical and market change and slower worldwide growth, a company - and its I, -- businesses - must change faster than the world around it. That's why General Electric embarked five years ago on a long-term strategy to become the most competi-tive enterprise in the world - not only in the 1980s, but in the 1990s and beyond. em M Central to our strategy is being number one or two in market share in 15 critical businesses which we've grouped into three circles: core manuflic-turing, technology and services. In core manutlicturing, we have six large businesses - lighting, major appliance, motor, turbine, transportation, construc-
~
?,_a tion equipment - that have a command-3; - g ing or leading market position. In the past
[n , - -( _4 Mg five years, we've insested more than S2 bil-t
- j. lion in these businesses to help ensure
-m. . . amam_. they'll be as strong in the 1990s as they Chairman and Chief Executve Off cer John F. Welch, Jr. (seated) is Banked are in the 1980s. The payotFtrom this in-i l by %ce Cho;rman and Execurve OMcer Lawrence A. Bossidy Oeft) and Mce vestment is entOuraging. Over the past f,ive Chairman and Enecurve OMcer Edward E. Hood, k (right). years - despite the cost of the heavy in-vestment, one of the worst postwar reces-sions, and increased ti> reign competition (aided by a strong dollar) that battered much of America's manutitcrucing sector
- the earnings of these businesses as a /
group have increased at an average annual rate of-;; . Equally important, they are well-positioned ti>r the f uture. l 1 L
s In GE's large technology businesses - Outside these circles, as well, are other medical systems, aircraft engine, aerospace, businesses: Some have performal very well materials, factory automation - our strat- in small or low-growth markets; some have egy is to make certain these businesses con- performed marginally; others are simply a tinue to improve their competitiveness poor strategic fit with the Company. In through a combination of synergistic ac- general, the managerial perform'ance in quisitions and substantial investments in these businesses was outstanding in 1985 research and development. R&D expense -and just as important to the Company's in these businesses was $7.8 billion in the short-term results as the performance of past five years; plant and equipment invest- our more strategic businesses. meat, $3.6 billion. During the 1981-85 . In 1980, GE's earnings were about period, earnings in these businesses as a equally divided between core manufactur-group grew at an average annual rate of 19E ' ing -on one hand -and technology and In our services businesses - financial ' services - on the other. Today, while core services, construction and engineering, nu- manufacturing has grown in absolute clear services, information services - busi- terms, about 70% of 1985 earnings came nesses where ideas overwhelm investment from technology and services.
- our strategy is to grow by adding entre-preneurial people, individuals who by p themselves can create new ventures, and by & q" A making related acquisitions. Employers Reinsurance Corporation, for example, was g[%gh As partof the engelag acquired in 1984 for S 1.1 billion and made Md inu-- ----- of our a positive contribution to earnings in its strategy, we signed in late 1985 a defini-very first year - even after allowing for all tive merger agreement whereby GE will acquisition costs. Our four services busi- pay approximately $6.3 billion in cash, nesses - led by financial services - have or $66.50 a share for common stock, to grown earnings during the past five years merge with RCA. After this merger, GE at an average annual rate of 16E will generate about 80% ofits earn-Outside the circles are three businesv ings from technology and services - and
- semiconductor, Ladd Petroleum. t% still have a very strong, competitive and General Electric Trading Compay 6 growing manufacturing segment.
provide support to the businesses .attun RCAs services and technology busi-the circles. nesses - the NBC network, the broadcast Also outside the circles are GE's ven- stations, the aerospace and defense busi-tures - such as our ceramics business and nesses, communications and the RCA Calma, our interactive graphics affiliate. Service Company - will complement our These ventures represent businesses that own businesses and help improve our have a chance to play a big role in what we global competitiveness. estimate to be large markets in the 1990s. General Electric already competes suc-At GE today, they're run by entrepreneurs cessfully in world markets, and we con-with their own boards - but with all the sistently rank among the nation's largest technological and financial resources that . come with being part of a larger company. ' i i 3
L 7 hj exporters. Our 1985 total exports were S4.0 billion, and our net exports were L[ wJ some ofour businesses had an ex
$2.6 billion positive in a U.S. economy cellent year, but a number of our key mar-that had almost a $150 billion merchandise kets were flat or down, reflecting the gen-trade deficit. eral sluggishness in the U.S. economy.
Because of the strong dollar, and our Overall, net earnings were $2.336 billion, commitment to maintain worldwide share, an increase of 2% from $2.280 billion in much of our export sales in recent years had 1984. Earnings per share were $5.13 for low or no profit margins. But we were able 1985 compared with $5.03 for 1984. Sales to compete because our strong domestic for 1985 were $28.29 billion, about 1% businesses could support our exports dur- more than 1984's $27.95 billion. Contrib-ing the period of dollar imbalance. The uting to the modest improvement in earn-merger with RCA - with its strong do- ings were better operating margins which, mestic businesses - will greatly improve at 10.4% of sales, exceeded last year's rec-our already significant global competitive- ord 10.2% rate. ness by increasing the staying power of an in 1985, we also made significant addi-American company, with American workers. tional progress toward our long-term goal The merger was approved by RCA's ofdisposing of businesses that don't fit share owners on February 13,1986. Dur- GE's future and of strengthening the pro-ing the next few months, it will be subject ductive capabilities of those that do. Total to review or approval by the Federal Com- value of transactions involving sales of as-munications Commission, theJustice De- sets during 1985 amounted to about $700 partment and other governmental authori- million, bringing the five-year total to ties. We anticipate the merger will be $5.6 billion. The money from these asset completed in the second halfof 1986. Our positioning for the future was ac-companied by significant growth during . the past five years: o Earnings have grown 10% a year - compounded. o Our stock, through appreciation and . y 5 1
, yield, has grown 25% a year compounded. g*
o We've outperformed, from the stand-point of both earnings growth and stock g-.m n appreciation, any group of peers - includ- -
. 7 ing the S&P 400, the " Blue Chip" (triple A-rated) companies, and the electrical
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equipment industry. meseera andd., ;- x r e ; r %.a hie a receed $2.6 blWon in 1988. The t - :; u,'s R&D Center in schenectedy, N.Y., continood key thrusts et strengthening GE technology in smete-riels, evtonietion, conopoter science and malere-electronics. Corrent work on flee advanced very large scale lategrated circuits shown here, for exannple, is being done to give GE a cosapetitive edge in aerospace end other businesses. 4 l
l i ( w sales has been essential to our restructurmg - i efforts - enabling us to invest in our key ' , , . businesses and to help make such acquisi-tions as Employers Reinsurance and RC A. , i . Also looking to the future, 288teP N UL o ' research and development expenditures from Company and customer e . O. funds totaled $2.6 billion in 1985, up from 198fs 52.3 billion. R&D expendi_ customer satisf.ction received renewed em-
- phasis throughout GE during 1985 as the Com-tures equaled 9k~ of 1985 sales compared ,,,ynom.,.d m ,,,,,.ms..d.,,, .hes with 8.29; in 198-1. Expenditures for plant desig ed to give oH customers - from individual and equi}, ment were about $2 billion. The h*"***"* '* "**"**"*' **"Penie s - a better quality of servl<e.
five-year investment in GE's future growth ,
-in plant and equipment and in research !
and development - totaled more than of special significance for us. We began
$20 billion. .
this venture five years ago; went through Some key businesses did better than we one of the worst postwar recessions; and, as anticipated m. 1985, some did about what . with most new ventures, made several mis-we expected, and some didn't quite meas- . takes and invested more money than we ure up to our expectations. Aircraft engine, had planned. But our staying power, and aerospace, financial serv ces, factory auto- . . . mation, nuclear services, construction confidence in the reindustrialization of. America, has been rewarded. Today, we equipment, transportation and the trading . . . have a growing, profitable business in less company performed better than our expec- . . time than it took us to do so m. either phis-tations. Maj.or apph.ance, lighting, motor, . medical systems, materials, informan.on tics or commercial aircraft engine - two services, Ladd Petroleum, semiconductor, other GE technology ventures that are now billion-dollar-plus businesses. and construction and engineering were GE business highlights for 1985 are dis-about on plan. Turbine, because of the se-cussed on pages 8-2<1. They m.clude tech-verely depressed worldwide market for . nology and marketing achievements for our electrical generating equipment, suffered a . phistics, medical systems, major appliance, significant erosion m earnings. Outside the . . lighting, aircraft engine, aerospace and 10-circles, very strong performances from C,anadian G,eneral Electnc and nower deliv-comotive busirrsses and the continued
- strong growth ofseveral businesses, led by ery were, unfortunately, overwhelmed by .
the disappointment in consumer electron-fmancial services. Another highlight - ' one t ics, which had a negative swirg of more t cmsses s7ral businesses - was the selection of GE m, a Gallup poll of U.S. than $50 million in earnings.
- consumers as the first company that comes
( Our factory automation business became l l profitable during 1985 - an achievement 5
I to mind when they consider worldwide services subsidiary have invested $22 bil-companies associated with high quality. lion in our own plants and in the factories, Our biggest disappoiritment in 1985 utilities, airlines and railroads of America, was not operational. It was the indictment creating or preserving at least 250,000 and guilty plea in a case involving im- jobs. While we paid $5.6 billion in taxes f proper timecard charges on a defense con- other than federal income taxes during the tract back in 1980. This incident was very past five years, the $22 billion investment difficult and painful for the men and deferred much of oar federal income tax women of General Electric, but we learned liability -a fact that has been misunder-much from it. We implemented signifi- stood by some advocates of tax reform. cantly more stringent financial and man- Although that pro-investment 1981 tax agement controls in our defense-related plan helped GE and other companies to businesses -including a new corporate modernize and automate their factories and policy, a Compliance Review Board and an to become more competitive in world mar-ombudsman. We are firmly committed to kets, current tax reform proposals would reducing the possibility of future trans- reduce or eliminate the incentives that fa-gressions and to finding - and reporting cilitated such investment and would seri-to the government - transgressions that ously impair the ability of American com-may have occurred in the past. panies to compete with foreign firms that In lifting the government's suspension of are strongly supported by their countries' the Company as a government contractor, fiscal and trade policies. While we accept then-Air Force Secretary Verne Orr ac - the reality that a system in which profita-knowledged the depth of our commitment ble corporations do not appear to pay taxes by stating: " General Electric has been very is politically unacceptable, we will con-forthright in uncovering, investigating and tinue to speak out on the critical need reporting to appropriate governmental for incentives for productive capital agencies potential past violations ofgov- investment. ernment procurement regulations. This co-operative self-policing effort provides a means for effectively discovering and re- - solving problems promptly and constructively." . ? Another disappointment during the past year was our inability to make the case for the crucial linkages among incentives for productive capital investment, worldwide competitiveness and America's standard of living. Since the 1981 federal tax plan went in'to effect, with ics provisions for m-vestment tax credit and accelerated cost re-covery, General Electric and its financial Leedership-m ebauty to inspire ehrs threagh visi , ore,e eed eemmitmene-is a ; critical asset being toeght to GE managers et- I tending coarses et the Company's Management Development Institete in Ossining, N.Y. 6 l l
m-y Lc y G [ Me economic outlook for 1986 is e Change must be accepted as the rule wd mixed. Although a few positives rather than the exception. have emerged, some negatives stubbornly . Open, candid, interactive, continuous persist. Interest rates are lower than a year communication up, down and across the ago, but inflation-adjusted "real rates" are Company is the key to gaining trust and still very high by most yardsticks. The commitment. trade-weighted dollar did start to fall in e Effective leadership involves the accep-1985, but still ended the year almost 50% tance and management of paradox. For ex-above its 1980 level. Even at today's ex- ample, we must function collectively as change rates, Japanese wage costs are only one Company and individually as many about 60% of the U.S. manufacturing av- businesses at the same time. Similarly, we erage, and Korean worker compensation is must meet our short-term commitments about 10% of the U.S. average. Other re- while investing for long-term success. straining forces are the still-unsettled state e Our resource allocation process must be of U.S. tax reform and the seemingly in- dynamic. Sometimes a business benefits as tractable federal deficit problem. a net importer of dollars, ideas and talent Against this backdrop, our economists while at other times the same business will are looking for a modest rebound in the be called upon to be a net exporter for the U.S. economy, and operating plans of GE's benefit of the Company as a whole. businesses for 1986 reflect - prudently, As we look to the next five years, our we believe a relatively low-growth sce- combination ofdifferent business cultures nario with modest earnings growth. Should and shared values gives GE the ability - the economy be more in line with the con- and flexibility - to win in world markets. sensus forecast ofclose to 4W real GNP lt provides the bond that stimulates our growth, we are well-positioned for good people, the most important asset of any or-earnings growth. ganization, to pursue a common goal-achieving excellence in everything we do. r~ ' a F he removal of an entire layer of . upper management structure in late 1985 gives significantly more responsibil-icy to the leaders of GE's various busi- John E Welch,Jr. nesses, freeing them to compete more ef, Chairman and Chief Executive OMcer fectively in world markets. We were able to make this major organizational change ' because of the growing recognition by GE people that, while we profit from the cul-tural diversity of our many businesses, we are governed by common policies and Lawrence A. Ik>ssidy Edward E. Homi,Jr. united by shared values. Our shared values Vice Chairman and Vice Chairman and include a recognition that: Executive Officer Executive Officer o Excellence can be measured only in terms of customer satisfaction, frbruary 14, 1986 7 l
$859 SSSIROSSGS, E
_ m 1 2 & , u a m . 2 a _ s m m m _ - _ a c~ m _. u m u n m m m e s m .u a ~ x a Our six core manufacturing businesses - lightmg, construction equipment, major appliance, motor, transportation and tur-bine - are all large, profitable and strong market leaders. To help them remain that way, we have invested $2.1 billion over the past five years to upgrade our plants for the future. y
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(Ligliting l i "1 GE has devised a special lighting L AJ system for the Statue of Liberty. The system, w hich will illuminate -
.s-the restored Statue at right when it i, ,/b ~
reopens inJuly 1986, creates the ' apparance of natural light by com-bining the cool and warm light ef-fects from two new AIulti-Vapor
- lamps, shown below being tested by research technician Alartin Hassink at the Company's lighting technology lab in Cleveland, Ohio.
A leader in lighting innovation, GE is the largest manufacturer of .. lighting products in the United J: States - pnxlucing more than one billion light bulbs annually Its 30 U.S. manufacturing plants, as well as facilities in Canada, latin Amer-ica and other international loca-l tions, serve a multibillion-dollar ' world market. Ti> continue this lighting leadership, the Company has invested more than $640 mil-lion over the past five years in plant ,i and equipment, including new high-speed manufacturing equip-ment for incandescent and fluores-cent lamps. The lighting business also manufactures rechargeable bat-teries, lighting fixtures and wiring devices, as well as quartz pnxlucts l fi>r the semiconductor, fiber optics
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with a full range of products that ,
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, people. During 1985, the con-struction equipment business con-l tinued to invest in improved manu- .
facturing technologies, including I the rew state-of-the-art clean room i < l at right that opened in Burlington, . . . , lowa, for the production of vacuum jjjasa ssuaramer4asummamm , interrupters. Used in GE switch, massassassamasses.mnaaEN888elsess888s g l gear, vacuum interrupters function jjjjlljgggggggj8,$g"q y_ like light switches, turning very i large electrical currents on arxl otL j Automated pnxluction of high-volume residential circuit breakers also began during the year. Other 1985 highlights for the construc-tion equipment business included the automation of kradcenter pro-duction in Morristown, Tenn., and the intnxluc tion of a new line of panelboards to be manufactured in the highly automated Salisbury, N.C. , plant. 9
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- / j GE is the world's leading supplier for appliances to very large motors a a > I ofelectric motors, such as the 96 ofseveral thousand horsepower for Energy $ aver
- motors installed in use in manufacturing and process 1985 to run the air intake and ex- industries. GE motors are available haust fans below at the newly in both normal efficiency and high opened Ibrt McHenry Tunnelin efTiciency Energy Saver designs.
Baltimore, Md. During the gar, The motor business also combined GE shipped 29 million motors of s. des and service functions into a almost every description, ranging new customer service organization from subfractional designs for use in 1985 as pan ofits drive to im-in computers to fractional motors prove customer satisfaction. I
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, $d delivery of 220 h>comotives to the People's Republic of China, General Electric received a follow-on order in 1985 for 201 more
; locomotives. Manufactured in the Erie, Pa., plant at left, the h>como-g tives will be shipput to China j through early 1986. The transpor-l [f ration systems business also
, ya shipped the 6rst praluction units i
. .. : iR.fd ofits new computer-controllal N Dash 8 locomotive to the Norfolk Cf$[kj Y - Southern Corporation in 1985 and
'w receival a significant first order for iTfj its new 190-ton motorized wheel 4 system, which will be used on mine haulage vehides in Australia. The market leader in elettric drive sys-tems for large off-the-nud mining i vehicles arxl transit cars, GE also is a market leader in computer-u>ntroikd hicomotives.
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O O a Turbine sanne on die mannude luunsula u>o-nK y.m an steam turbme-below in Tokyo llap the world's gerx rators t>L also u mbmed its lareest and most tethnaalh ad- steam turbnx and g.ts turbux orga-1 an< td uimbuxsis u le pow er sta- nizations m U>SS to unprose man-t it ill teartiring I f (YI 5'I'dkh .tgenk nt L ttet tis e!K%s athl help u >mbmeds y k systems -istak- m.untain the ( ompany s posinon as mg shape ()ne unit w ent into u >m- tht workis leadmg suppher or ilx-rt i.il i >[ Trac li)(1 ill 1.it t l')h 5 [N1wt r cefx rarl(in systel1h dih ltic
\\ hen the plant is <ompit ted m half of t he w orld s ! a rneg.iw at t l'M. it u ill generate 2.000 meca. and I.uger gas turbnx s are GI -
w ar ts or elet tra it s f or Tok so i let - Jesierxst. and more than halt of the t ra Pow er ( ompans. Int ( )t her t let t rit pow cr in t he t 'nited states highlights t< >r t he vcar iix luded the is gera rated bs (il srcarn t urbirx - -
<k hsers ut t he w orld s larcest 60- ceix rators This busmess also is t he herte cencrator to a power plant in leadme suppher of ship propulsion drl/t ella . irk l t he si./ fling ()t ari and turbirx -gt rx r.it< >r syst erin ti,
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% . one under production at hiilwau-l kee, Wis. Tnhnical advances made ! in AtR included the first demon-j strations ofintegrated imaging and
- spectroscopy (chemical analysis), as l
; well as progress in using 51R for special studies of the central nerv-ous system, abdomen, chest and eyes. The medical systems business ,
, continued making major strides in l 1
other areas, too. The new CT 9800 ! Quick? system enhances GE's ) world-leading gusition in the pre- J j mium erx! of the computed tomog-i raphy marker, while the CT 9000
- pnxluced by itsJapanese joint
- venture firm -is now the mid- l I
priced leader in the U.S. market. l l c GE also has a major share of the l U.S. market for X-ray systems, has l gained in the domestic market for
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Aircraft Engine Glis airt ratt enane busness en- the Stprember delisery to Thai other research and desetopment toyed its best year estr in l')M. A Internanonal Airways of the programs and in manufatturing total or 2 lSo let engmes uere A ion-4H) airplane below, the ret hnology to cononue positioning shipped to u>mmerual, mihtary. tirst equipped w ith GI!'s new airt raft engine for further growth manne anif industrial customers. Ll6NC2 high-bypass turbofan in the highly uimpetitive 11.S., This produtnon at civity was due, (ngue. This engine also was or- European and Far East markets. in part, to the growing worldwide dered for other advanced Airbus p pulancy or the LFAl%-; com- Industne and Ikiemg airc raft. GE HKTctal engine on thsung airplanes, also brought its revolutionary as w ell as step;rd-up prulut tion l:DF ' (l!ndutted I an) engine to rates for the Flo! and Tl Y) mili- test in August. 5how n alxne with tary engines for the l' S Air Ibrte. its thm. sueptbat k fan blades, the 7 Dunng the year, Cl Al Interna- UDI set a worlds record for fuel ! nonal - a joint tompany of eftiuenty m its hrst series of tests, ,,_ General I.lectric and SNLCA1 A of attauung fuel u>nsumption levels f rante - delnered its I,oooth approximately 20'; lower than to- / engine. in aaauion. the large u>m-nrrtial enxur busurss telebrated aay s most etikient tuax, fan. signir-nant invesonents wert made in f,
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bosux n Aln a.h a Ic.n hnc sup a lso be c n l ik selopnx nt work on pher . rin <lt tt ns. . spau and! .n u - t ht t 'ppe r Atinospht n Resc.in h non markers. riux (,I busun ss is san t hrc 'l A R V t he ( ompany's pn parme ti,r turrht r . crow th b\ bic cest s.uclh re n er N hnlulcil for stcaibh rn riurinc ix w ( nenwx tinc laun< h in l'M l 'A R s w ill i,u up\ rah or . uni b\ un est me h< .n ik in ma in r h.in halt ut a spau shur r;e s i h u l. p m e sui h u n pi r r u n n t h i ir ci , b.n ni ,li .c n s is n u roi h, t runn s u e na l pri i ss m e .u n ! 1 < ,r o pu r e r si ,t r w a n d!! n if ic l' hh 1 l: '. t lt 1[1li H r i r s w t rt (
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; = De Company's plastics business is ers, lights, instrunrnt panels and L< ..1 M benefiting from the increasing use other parts. During 1985, GE of high-[rrformance plastics in au- strengtherrd its world leadership comobiks, such as these bumpers in engineering thermoplastics.' It being pnx!uced n>r the li>rd Taurus unveiksi two trw resin lines -
and Stercury Sable at a li>rd plant Iomal" thermoplastic clastonrrs in 5tilan, 51ich. Several new car and Geloy' weatherable resins - malels, for uample, conta;n up to and intnduced Noryl GTX ' resin, 65 pounds o! GE plastics in bump- a plastic for use in automotive exte-riors. A marketing venture n>r i 3 Gepax' plastic packaging also be-
- 3. gan in 1985. The plastics business i continued work on a new $325
, million plant in llurkville, Ala.,
I 3 for the pnxluction and wm[x>und-
)l ing ofIrxan- [mlycarbonate, its flagship material. Irxan resin is being usetl in eurything from the s .
baby bottie above to wiralows and j lawn mowers. Homwwners and [ - other customers also turn to G E .sil-icone pnnlucts for scaling wirxlows, luthnum fixtures, auto parts and other items. In addition to silicone scalants, the Company's engineered materials business markets a bnud lirr ofindustrial diamonds and
- g. other spuialized pnxlutts for mn-r strtxtion, drilling, mining arxl ekt trical applicarions. The ekt-tronks irxiustry also utilizes GE's chemical materials to sharpen the photographic image used to pn>-
. duce wmplex micnt hips.
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l IIluetory Automation ! l j General Electric made continued with laser optics (based on develop- automation systems for the paper, , a progress in its factory automation ments at the Company's R&D mining, drilling, automotive test-business during 1985. A technol. Center)and software packages for ing, ship propulsion atxl metals in-f ogy start-up in the early 1980s, shop floor management. A new dustries. GE drive systems, for ex-this business is now in the black- Genet
- communications network ample, enabled the slab-castmg I becoming profitable faster than for tying factory automation equip- complex below at LTV Srcel's either commercial aircraft engine or ment together was derived from Indiana Hacbor Works in Whiting, plastics, two other technology the technology ofIndustrial Ind., to set monthly production start-ups that are now multibillion- Networking, Inc., a joint venture records in 1985.
l dollar GE businesses. During the (with Ungermann-Bass, Inc.) that year, the fxtory automation busi- is emerging as a leader in the indus-l ness unveiled a new automation trial communications market. GE's ! l ! center in Frankfurt, West Ger- drive systems business strengthened i many, to further penetrate the Eu- its position as the world's leading ropean market. Shown directly be- supplier ofcustomized drive and l low, it is equipped with the latest a j in automated manufacturing and -
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t warehousing systems and serves as _ :- e, ! an application, training and dem- 8' ~ ! onstration facility for GE cus-tomers. The Company also intro- \ , i l duced new products and services to F~"' . i help customers improve productiv- .
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ity, including the GENIUS'!/O W, . ' system that saves on installation costs and provides a sixfold im. p hO provement in the diagnostic capa-
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bilities of the already successful ' Series Six* programmable control-ler. Other 1985 intnxiuctions in- - O q # cluded the P60 six-axis robot, the ' ' O. . .' . .,. - ' . MIGTR AK 2welding seam tracker j ., , o O ' ,d I o 4
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Our services businesses range from con-struction and engineering services to finan-cial services, from information services to nuclear services. To continue developing these opportunities, we have expanded our capabilities through acquisitions and other investments - $2.0 billion worth over the last five years - and innovative solutions to customer needs. (A- ' j-- e
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c i a i-.w., , GE provides a wide variety of con-struction arxl engineering sers ices throughout the world. Ibr exam-ple, GE systems engineers designed - , and are installing a customized pg;p control system for this new brass p mill at the Chase tirass Company in ' North Carolina. During the year, ' the domestic business also received major contracts for assembling and
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g' g v. rehabihtating transit cars and be- 8Mgu gan o,nstructing a $63 million 1 b gg refuse-to-energy power plant in d'#- ' I Maine. It is also a leader in the in- g 'I 'g' f stallation, maintenance and mod- 1 g M
- ernization of pmer systems equip- Y ment, emironmental controls arxl factory automation pnducts for in-dustrial and electric utility plants.
Internationally, this business con-(entrated in 19M on providing timely construction ark! engineer-ing services for a c hanging world marketplate. Rehabilitation proj-ects, such as the ihminican Re-public's Rio Haina steam turbine plant, can add about 20 years of useful hfe. Remote area capabili-ties, demonstrated by the Guddu, Pakistan, gas turbine installation, can give GE the competitive edge in major equipment sales. Aral GE's advanud repair capabilities add to the Company's advantage. 19
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; Gerrral Electric is the only non- GECC is a leader in leasing anti in cant progrrss since it was acquiral
, - tunk among the top 10 business- leveragetl buyuuts, such as the $83 in 198 L One of the that largest to-business financing leaders in the million transaction in 1985 that al- pn>perty arxl casualty reinsurers in l United States. Through its affiliate, lowed a managenrnt team to pur- the United States, ERC experi-General Electric Financial Services, chase the Dr Pepper luttling com- ental a 5&J increase in net written - Inc. (GEFS), the Cornpany pro- guny at right in Dallas, Texas. The premiums during 1985 and made a logos triow represent a few of the $36 milhon net mntribution to vides reinsurante for companies to prorett their property atx! funding other 48 leveraged buyuuts financed GEFS carnings after allowing for _ for industries to expand or auto- or refinanted by GECC over the all acquisition msts. Financial mate, manufacturers to finance gust two years. GECC also ex- services also indudes the General pnxluct saln through retail credit pux!cd its financial services in 1985 Elet tric Venture Capital Corpora- _ ? agntments and entreprerrurs to by adding a computer leasing busi- tion, w hi(h held dirnt investments
- acquire businesses through lever- ness to its inhnology equipnrnt in 51 mmpanies at year end.
= aged buyuuts. Part of GEFS, the financing operation and two auto Gerrral Electric Credit Corporation auction mmlunies to its asset man-(GECC) is the nation's largest di- agenwnt activities. Another gurt of versitied finance mmluny with art GEFS, Employers Reinsurance Cor-earning assets of $20.2 billion. poration (ERC) has made signifi-
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Our semiconductor, petroleum and trading operations help support the worldwide competitiveness of our 15 key businesses. The semiconductor business is critical to giving G E pnxiucts a competitive elec-tronics edge. Lidd Petroleum provides a back-up supply of petrochemical feedstock for our $2 billion-plus materials busi- - nesses. And our corporate trading opera-tions enhance GE's competitiveness in domestic and international markets. b Semilconductor ( The computer-generated image at 4 right un be pnmju ed in 1/500th the usual time with a new " graph-its pnicessor" fn>m GE's semicon- ij g doctor business. Using semicustom 7
, , , :- ,gg (hips designeJ and manufactured at t ~
3 the Mitruelectronics Center in U , North Can>hna, the graphics proc- *" - essor in front ofengintering pro-gram analyst Van dan Nguyen re- 1 places the powerful computers and
,7 extensive software pn> grams nor- q mally needed ro create fast, high-quality three-dimensional images.
Initially, this technology will be used by GE's aerospace business to ~ impnne its aircraft and training simulators and by GE's C lma af61-iate to pntfute three-dimensional engineering models that can be up-dated quickly on a screen. Another semiconductor development in 1985 was the intnx!uction of GE-Smart' intelligent power sys-tems. Based in part on innovations at the Company's R&D Center, GE-Smart systems (ombine signal-pn(essing with power switching for motors and other devices. In ad-dition to supplying GE and exter-nal customers with sophisticated integrated circuits and other elec-rn>nic devices, the semiconductor business trains GE engineers in the design and use of elettronics. 23
\ l k - l l I Ladd Petroleum i : This GE affiliate is one of the top During the year, Ladd made addi-
- tional dixoveries in Texas, Okla-
-.10 independent (non-major) oil and i gas pnxlucers in the United States. homa and Canada and continued its I
.l It is also an industry leader in re- successful development program in l 'l serve growth and profitable drill- the southwestern area of Colorado
" ing.12dd's average finding and de- shown here In addition, Ladd ac-velopment costs per barrel have quired a gathering system, pipeline historically been below the indus- and other selected assets of Funk 1
try average, with 1985 marking its Exploration, Inc. in Oklahoma to
' lowest cost level in five years. complement its natural gas business. ;
i v l f J l heding Operations p------'- 7 - q~19 [
; Corporate trading operations com- [ 4 1-
, ,4 *
- bines the resources of the General h- ,. - .- #w ; gf . ;
* ' t .. 1 ' ~ k ,7
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Electric Trading Company ..
.. pg.
(GETC), the General Electric Sup- - J ply Company (GESCO) and the . fk-I ~ , corporate sourcing operation to .
#7 (.O ,-
'ie help GE businesses win in today's _, #" ,
M."
competitive marketplace. GETC *' ' ?
- s. 6
' ^
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undertakes arxl fulfills the counter- ,, ,,,, ,, trade, offset and barter obligations , s - that have increasingly become a g- g" a *pv~ r %- condition for sales in world mar- _ V kets. In 1985, such gormls as steel , coil, pipe arxl boric acid left the Istanbut docks at right and other ['_ . s u. l Turkish pirts as countertrade re- p % quired to support an $800 million I GE aircraft engine sale to Turkey. In addition to the Aliddle East, I other major trading areas for GETC l - which supp>rted $2 A billion of GE's exp>rt business over the last three years - are Europe and Asia. l l GESCO has more than 150 outlets l throughout the United States to fulfill its role as a k-ading distribu-tor of GE and non-GE pnxtucts.
'Ihc wrporate sourcing operation is resp >nsible for wnsolidating the buying power of GE businesses and for developing, with GETC, a worldwide sourcing network to en-hante the mmpetitive kadership of GE pnx!ucts.
21
FinancialS ction 4 Centegets G.n.r.1 Electrie/S&P 400.nn I ..rnings p.e .h.r. s r.. /d .. .. ,.r.de.neso 37 Statement of financial responsibih.ty 37 Report ofindependent certified public 804 accountants Audited financialstateneents "' 26 Earnings gg g ,o 28 Financial position g7 p 30 Changes in financial position d Ed. L 20 38-51 Notes to financial statements Suppleasesstel comeneentary and date
, on,mi am,,&
= simi,w. e, g 5 gp {s n (Unaudited, including einerts) $";DT,"jL, [ 63 27 Earnings - 20 1 29 Financial position 1
31 Changes in financial position 32-33 Selected financial data 31-36 Summary ofindustry segments A 51 EtTect of changing prices 7"'*"' 450 AM _ sou J E 270
!EE.E..EE
. Im m2 Im 19Ms E.
nm t eiviey s.,s.y.._pr.d , . -. s.-,1 ,
$100 46 90 M. NO
#RERIME ,,,
EMENW!E e, WEEME y l')M l 1981 1941 19$1) 1986 25
a Stctsment of Ecrninas * """"'","'""'"i""'
.nal wns hilarnt athharn l
l l l Iiir the years endet! Detember 3 I (In millions) 1985 1984 1983 Sales of products emel services to custoniers $28,285 $27,917 $26,797 Cperating costs Cost ofgoods sold 19,775 19,460 18,701 Selling, general and administrative expense 4.349 4,542 4,463 J Depreciation, depletion and amortization 1,226 1,100 1,084 Operating costs (notes 3 and i) 25,350 25,102 24,218 Operating margin 2,935 2,845 2,549 ' Other income (note 5) 987 989 884 Interest and other fmancial charges (note 6) (360) (333) (370) Earnings before unuswel itenes, income taxes and minority interest 3,562 3,501 3,063 Umsvalitems Gains from sales of assets 518 617 117 Provisions for business restructuring activities (4 17) (636) (147) Special payment to non-exempt and hourly employees (93) - - Revaluation of goodw ill and intangibles - (126) - Unusual items (note 7) (22) (145) (30) Earnlap before income taxes and minority Interest 3,540 3,356 3,033 Provision for income taxes (note 8) (1,192) (1,065) (975) Minority interest in earnings of consolidated affiliates Net earnings (12) _ (l1) (34)
$ 2,336 $ 2,280 $ 2,024 Net earnings per share (in dollars) $ 5.I3 $ 5.03 $ 4.45 Dividends declared per share (in dollars) $ 2.23 $ 2.05 $ 1.875 Operating margin as a percentage of sales 10.4 7 10.2% 9.59 Net earnings as a percentage of sales 8.39 8.27 7.6%
The notes to fmarKial statements on ruges 38-51 are an integral [urt ofihis statenvent. ] i I ! percent of sales change from prevlees year Research and development expense es e percestege el seios l im im 90 N _. 15 - 6
.- s 7 l
-90 0 19MI l'/M2 1985 1981 l'/Hi 1981 l'/H1 19HI 1986 1981 26
7,, ~ ~ [ The Statement of Earnings summarizes GE's oper- tablishes generally accepted accounting principles in the
, ating performance over the last three years. Related United States. GE has not yet decided whether it will information can be found in the Irrter to Share Owners on implenrnt the new rules in 1986 or 1987, nor has it pages 2-7, which provides commentary about the concluded its evaluation of the multiple effects ofimple-Company's strategy and objectives, both long-term and mentation. However, preliminary indications are that in short-term, as well as certain developments in 1985. Ad- the near term a significant [mrtion of pension expense will ditional intbrmation about trends in total Company oper- be met f rom Trust income, including increased recogni-ating performance is in Selec ed 1:inancial Data on pages tion of market appreciation.
32-33 and infi>rmation about operations of GE businesses e Other income was relatively unthanged in total in 1985 is presented m the Summary of Industry Segments on fi>llowing a $ 105 million increase in 19S i from 1983 pages 31-;6. Notes to hnancul Statements mclude f ur- iMajor components ofother income include the net earn-ther detads. While earnings growth has been maintained of Gwal Elmic Financial Services, Inc. (GEFS) i m each of the last three years, signit cant progress has and (ming highly liquid investments. The 26'J in-continued toward Company goals of disposmg or busi- crease in GEFS earnings in 1985 to $413 million was nesses that don t tit GE s future and of strengthening the '
& i i by Itss income from investments (invest-pnxiuctive capabilities of those that do. The ti>llowmg a 1 r dwing 1985 md Ao end paragraphs comment on some important teatures of the lower interest rates). In 1984, earnings ofImth GEFS and items shown m the Statement of Earnings.
d investments were substantially almve 198 3. o Sales increases were modest in 1985 (up l'J from 198 i)
. . . e Interest and other knancial d. urces were $ ;60 million and in 1981(up -l'; from 1983), reflectme m part busi- %
m 1985, an increase of $2,/ md. lion f rom the previous year. ness disposition activity. h.>r example, adjusting for the . This increase was due mainly to a hieher level of average dirimsitions m early 19S i of Utah International and the
, , . domestic borrowings that was only partly offset by lower housewares busmess, sales would have been up 3'r m . . .
mterest rates. The reduction ($3 r md. h.on) m 198. .i mter-1985 and 10'< in 198 i. Several other factors base com-est expense from 198; was because oflower average bor-bm.ed to dampen price and volume crowth, displayed in mwings, pnadpdy h fort %n aEata the chart on page 26. These fattors have induded rec, nt sluggishness in the U.S. and world economics and the ton- e Unusual items wnsist of a number of transactions, most tinuing impact of the non-competitive U.S. dollar, which of which are related to major changes being made to posi-attracts a wide array ofimports w hile simultaneously mak . tion the Company thr future growth by shifting the busi-ing it more diftkult to sell U.S. pnxluus overseas. ness mix to one wmpatible with long-term strategit objetrives and to reorganize anJ restructure ongoing oper-o Operatingmarcin - sales less all operatmg wsts - . atmns. Unusual gam.s f. rom sales of assets durm.g the last was 10. l'< or sales in 1985, tbilowing the strong 10.2%- Ne Fars apgard $ L2H. Mon, nnth k.oni disiw rate of 19S i and 9.5'! in 198 4. sitions of Utah International, the housewares business and o Omratine wsts indude expenditures thr researth and virtually all of GE's fbrmer broadcasting and tablevision development, an important asjut of future growth. 'Ibral o;wrations. Provisions for business restructuring auivities rad expenthtures in 1985 amounted to $2.553 billion, - principally devoted to rationalizing, reorganizing and of which $ l.069 billion was from Company funds and improving selected pnxluuion activities; redudng threign 51.J48 i bilhon was from customer funds. 'Ibral R&D in- and domestic risk exposures; and phasing out or otherwise creased I l'.; from 198 i, with both types of funding being wnduding other activities - amounted to S 1.230 billion higher. More imjurtant, resources devoted to R&D have in 198 4-85. Other unusual wsts or c harges have induded inc reased sharply in recent years, as depiued in the chart a sluial, one-time cash pay ment to (ertain employees in on page 26 which shows that total R&D expense as a 1985 lbliowing union mntrau negotiations during the percentage of sales has grown f rom 6.2'i in 19S I to 9.07 year, and a 198 i downward revaluation of g(xxiwill atal in 1985 - while earnings grow th has been maintained. intangibles luause of rapid changes in (ertain tu hnology Another important operating wst is employee pension businesses. Note 7 to the finandal statements shows an-expense, w hith was 5196 million in 1985 wmpared with nual details of these unusual items, the aggregate effeu of
$60 3 million in 198 i and $6H million in 198 4. Pension whic h has had only a negligible impau on the Company's msts have been fawrably affeued by ruent higher real net earnings m ca(h of the last three years.
returns on pension investments. A sigmfhant change in A discussion of the Company's 1985 total tax position is future pension auounting rules has retently been adopted on page 33. by the Financial Auountmg Standards lioard, w hith es-27
Statamcntcf Fin ncialPccificn " '" ' """"' P""v
".u"x"l oiriu lalarn! attiliare At IXtember 31 (in millions) 1985 1984 Assets Cash (note 9) $ 1,606 $ 1,859 Alarketable securities (note 9) 951 514 Current receivables (note 10) 6,040 5,509 inventories (note 1 I) 3,949 3,670 Current assets 12,546 11,552 Property, plant and equipment - net (note 12) 8,328 7,690 Funds held for business development (note 13) 726 814 Other investments (note 14) 3,150 2,903 Other assets (note 15) 1,682 -1,771 Total assets $26,432 $24,730 Liabilities med equity Short-term borrowings(note 16) $~1,297 $ 1,017 Accounts payable (note 17) 2,201 1,931 Progress co'!xtions and price adjustments accrued 2,257 2,403 Dividends payable 264 250 Taxes accrued 751 673 Other costs and expenses accrued (note 18) 2,146 2,303 Current liabilities 8,919 8,607 fong-term borrowings (note 19)- 753 753 Other liabilities 2,728 2,668 Total liabilities 12,400 12,028 Alinority interest in equity of consolidated affiliates 128 129 Common stock 0163,282,000 and 462,928,000 shares issued Derember 31,1985 and 1984, respectively) 579 579 Other capital Mi 610 Retained earnings 12,994 11,667 Less common stock held in treasury (310) (313)
Total share owners' equity (notes 20 and 21) 13,904 12.573 Totalliabilities and equity $26,432 $24,730 Commitments and contingent liabilities (note 22)
'lh notes to finanaal statements on pages W-51 are an integral part of this statement.
I Eereings retained for geewth and used for dividends Shere owners' egelty per shore-(deliers per share) Deceaeber 31 (dellers) s6 o $52 w _ -e -i a s h, n oo _____j \C A L 19.20 d T: XEE m, eWVT"El I,_ E] XBES ,, DA RXN] m
=~ q q agqgg , egggg ,
19M1 19Ml 19M5 19M8 1981 1981 1982 19Mi 19M1 19MS I 28
l l
, The Staternent of Financial Position shows the wares business disp >sition included LIFO reserves of Company's balance sheet at year-end 1985 compared $32 million.
with the previous year end. e Key elements of working capital (receivables and inven-o Cash and marketable securities classified as current as- tories less trade payables and progress collections)"turtxsl sets amounted to $2.6 billion as of December 31,1985. over" 4.11 times in 1985. Turnover relates the level of In addition to these amounts, funds held for business de- working capital to sales realized during the year. In 1981, velopment (5726 million at the end of 1985) consist of average turnover at 4.41 times had been the twst in 10 investments equally as liquid as current marketable securi- years. Most businesses experienced lower turnover in ties but not classified as " current" because, although avail- 1985, mainly because of higher average inventory levels able, their use during 1986 is not currently plamxd The and the working off of progress collections in power sys-aggregate of these combined, highly liquid assets was tems businesses. Management continues to stress vigorous S3.3 billion at the end of 1985, up slightly from $3.2 control of working capital to balance business growth billion the previous year. needs against the interest cost on capital lock-up. o Current receivables are mainly amounts due from cus- e 'Ibral debt (short-term and long-term) at 12.7'J of total comers (54.6 billion at December 31,1985, compared capital at IXtemtwr 31,1985, remained quite low and with $ 1.3 billion at the end of 1981) from sales of prod- results in a lusis for significant additional lx>rrowing ca-ucts and services. Customer receivables as measured by the pacity for such transactions as the prop > sed acquisition of number of days of bi!!ing outstanding generally were bet- RCA Corporation (see note 2 to the financial statements). ter through most of 1985 than in 198 i. At Daember 31, After reviewing the proposed acquisition, the maior 1985, the number of days billing (12)in customer receiv- debt-rating agencies have rvently reaffirmed GE's " triple ables was three days less than at year-end 1984 and repre- A" debt rating, the highest classification. sented the lowest Daember in at least 15 years. Other . . ..
- E.arrungs retamed for growth, dividends to share owners nwasurements related to receivables include delinquency .
and share owners. equity irr share (.. book value..) have ratios and amounts past due. Although GE's diverse busi-nesses had differing experiences in 1985 in response to gmwn sw y om dw p hw yms. varying business conditions in markets served, the overall In summary, General Electric's financial condition remains condition of customer receivables remained excellent at strong. The Company's financial resources and liquidity as December 31,1985. Current receivables other than those of December 31,1985, including highly liquid assets of owed by customers include amounts due from several S3.3 billion, total assets of $26.4 billion, share owners' types of transactions, such as advances to suppliers in con- equity of S 13.9 billion and substantial capacity to add nection with major contracts. necessary debt in addition to existing lunk credit lines, are o Inventories were $3.9 billion at December 31,1985, believed to be entirely adequate to: compared with $3.7 billion a year earlier. 'Iotal inventories e Provide fi>r seasonal working capital needs during 1986. were higher during most of 1985 than in 1981, but Ly year end we.e equal to 163 days of output on hand. This
* ""Y f"'P'""'"" '4" P"*"' " P'" '"**"' -
was seven days less than the year befi>re. Increases and gyected to be about $ 1.6 bilhon durmg stimate 1986. E."' f utum plant arwnt ums already approved aggregated decreases in inventories varied considerably among GE businesses because of differences in anticipated 19bhus- S 3 pon t dw end of 1985, of w hkh appmsnawly 6W n plannd to bpent in in tomer demand and actual sales during 1985. Major inven- ) tory reductions oaurred in turbine, nuclear, consumer e Enable the Company to wntinue a high level of pro-ekttronics and major appliance operations, while aircraft grammed expenses fi>r research and development as well as engine had a significant increase. to support other business growth activities. l There was a net favorable last-in first-out (1.110)inven-
- I tory adjustment to cost of goods sold of S 17 I million in _ >nyplew w proposed auluisition of RC. A Corporation. j 1985 compared with similar favorable adjustments of
.om m shonenn and lonpann binowings to h,nana M " " U# *
$ 125 million in 1984 arxl S 114 million in 1983. These amounts include reductions in ElFO reserves (S 128 mil-and 0 h." *
- on.
lion in 1985, S 125 million in 1981 and S 132 million in , 1983) because of reduced inventory levels in cenain busi- l nesses, mainly p>wer systems. Also in 1981, the house- l l l n
"""' umnam,nrany Stctsmant of Changoc in Financizi Pcsiti:n ""^'"""' "'"'""I'""
Fands providad (ussd) 1 1 lbr the wars ended December 31 On milhons) 1985 1984 1983
'Vnds provided from operations l Net earnings $2,336 $2,280 $2,024 Adjustments for items not representing current fund usage:
Depreciation, depletion and amortization 1,226 1,100 1,084 Earnings retained by nonconsolidated financial services affiliates (411) (330) (55) l income tax timing ditTerences 177 (171) 4 All other operating items 12 11 34 Funds provi&d from operations 3,340 2,890 3,091 Funds provided from (used for) changes in working capital Decrease (increase)in inventories (279) (512) (129) Decrease (increase) in current receivables (531) (260) (509) Increase (decrease) in current liabilities other than short-term borrowings 62 (112) 556 Net funds provi&d from (used for) working capital (748) (884) (82) Total funds provided from operations and working capital 2,592 2,006 3,009 Funds provided from (used in) investment and other j long-term transactions Additions to property, plant and equipment (2,038) (2,488) (1,721) Dispositions of property, plant and equipment ~ 142 1,346 209 Use of(additions to) funds held for business development 88 (359) (455) Additional investments in nonconsolidated financial services afliliates - - (228) All other transactions - net 167 454 158 Net investment transactions (1,611) (1,0 17) (2,037) Funds provided from (used in) financial transactions Disposition of GE shares from treasury 286 254 238 Purchase of GE shares for treasury (283) (281) (319) Increase in long-term borrowings 17I 80 52 Decrease in long-term borrowings (171) (2 12) (152) Net financial transactions 3 (192) (181) l Funds used for dividends declared (1,020) (930) (852) Netincrease (decrease)in funds S~(66) $ (163) $ (6I) Analysis of net change in funds 1 Increase (decrease)in cash and marketable securities $ 184 $ (132) A (82) Decrease (increase) in short-term borrowings (250) (31) 21 Increase (decrease)in funds $ (66) $ (163) $ (61) The notes to finanual statements on pages N-51 are an integral part of this statement. Cenoperisen of funds New frene operations witte fonds Borrowings es e percentage of tetet sepitelievested esed for dividends and property, plant and easelyneemt ($ 1 millions)
$15 20%
- 16
. 2.1 _ m 12 lr, 4828 I I N O hnis tiow frorn P; l
<>pe raouns Ioli usal for: ,7
,: 4 O Plant aral eqmprnent .; . , . y e Dmands i 4 % 0 0 Pld t P>M1 1984 19M6 P/Ms 19MI P/M2 P>M ) 19Mt l'1M5
,$O
I
- a L
. The Statement of Changes in Financial Posi- There have been no additional imestments in nonwnso-L tion summarizes the main sources of the Company's lidated financial services alliliates since 198 3. Those aflili-funds and the uses to w hich they have been put. This ates retainal their earnings fiv 1981 and 1985 to finance Statement helps to show the relationship lwtween oiwra- their own capital needs.
tions, w hi$h are presented in the Statement of Earnings' e F nancial transxtions have not lxrn a significant source and hqu dity and financial resources, w hich are depictal
. of funds for GE in recen't 3rars, and the ratio of debt to m the Statement of hnancial Positmn.
total capital remains very low. Ifowever, in 1986 it is o " Funds" as usal in this Statement, with changes sum- exlwcted that significant amounts of new long-term bor-marized at the bottom, consist only of amounts classified rowings w ill be rxeded to wmplete the prop > sed acquisi-as current. At year-end 1985, these wcre cash ($ 1.606 tion of RC A Corp > ration. billion) plus marketable securities expectal to be used e Dividends declared totaled $ 1.020 billion in 1985. At durmg 1986($951 million)less short-term borrowmps' S2.23 wr share (up 18 (ents),1985 marked the 10th i.e., those due to be paid during the next year ($ 1.297 m i m ofincrease i dividends fi>r share owners. bilhon). Changes m other highly hquid f unds that are GE's plicy is to maintain dividend growth while at the exiuted to be used longer-term (tunds held fi>r business same time retaining sutlicient earnings to enhance produc-development - $726 mdlion at December 31,1985)are ti apability and to provide adequate financial resources treated as a provider or user of the more current , timds. fi>r growth opportunities. o Operations base twen GE's principal source of funds' A recapitulation fiar the last five >rars shows that GE and ranging between $2.9 billion and $3.3 billion for the last . its consolidated affih.ates have generated f unds of $ l 1.9 three >vars. Details of the composition of tunds provided billion from operations. This has covered cumulative f rom operations, startmg with net earnings, are shown at the top of the Statement. usage of 511.2 billion devoted to recurring needs fi>r new.. and improved property, plant and equipment and fi>r divi-o Working capital can be either a provider or user of dends to share owners. Net funds activity fi>r all other funds. In GE's case, working capital assets - receivables purposes - future business development; additional and inventories - have been increased in eac h of the last working capital, debt reduction, corp > rate restructuring three years in order to maintain earnings growth while programs, business dispositions - resultal in an aggre-minimizing untrcessary h>ck-up of funds as discussed on gate use over the past five years of $578 million. As a page 29. result, net funds at December 31,1985, were $ 152 mil-hon more than at the beginning of 1981. A discussion of o Investment transactions involve inflows and outflows of combinal funds dow activity fi>r Gh and nomwididated funds with longer-term etiicts. Additions to property, , affiliates follows the discussion of Gh, s rotal tax position plant and equipment have born GE's principal use oflong-term timds for many years. Although down from 198 l's "" P#F' 3 record $2.5 billion,1985 plant and equipment exiwndi-tures of 52.0 billion were still substantial and brought the five->rar reinvestment in GE's pmductive capacity to al-most $ 10 billion. Of that total, 29'J was to increase ca-pacity; 25'i was to increase pnductivity; 169 was to supp>rt new business start-ups; 129 was to replace and renew older equipment; and IS'J was fi>r pn,jects involv-ing such other activitic:s as improving R&D facilities and satity and environmental protection. Dispositions of pnywrty, plant and equipment provided wnsiderably more funds in 1981 than in other years, prin-(ipally Ircause they included the efTect of disposing of the fixed assets of Utah International. The impacc of all dispw sitions, inciuding Utah, aflitts most of the lines in this Statement. Funds held fi>r business development are discussed above. 31
solactad Financini Dcta $1'd'M";j "llC i i (Ibilar amounts in milhons; gwr-share amounts m dollars) 1985 198I 1983 1982 198I Sales of products and services to customers S 28,285 $ 27,917 $ 26,797 $ 26,500 5 27,210 Operating margin 2,935 2,8 15 2,549 2,405 2,417 : Earnings trfore unusual items, income taxes an 1 1 minority interest 3,562 3,501 3,063 2,753 2,660 (145) (30) l Unusual items - net (before taxes) (22) - - Earnings lxfore income taxes and minority interest 3,540 3,356 3,033 2,753 2,660 Net earnings 2,336 2,280 2,021 1,817 1,652 Net earnings per share S 5.13 $ 5.03 5 1.45 $ 4.00 $ 3.63 Divi &nds dalared per share $ 2.23 $ 2.05 $ 1.875 S 1.675 $ 1.575 Operating margin as a percentage of sales 10.19(- 10. 2'J 9.59; 9.19/ 9.0'J Net earnings as a percentage of sales 8. 3 <# 8. 2rJ 7 . 6 91 6.9 96 6. Ir4 Net earnings on average share owners' equity 17.69F 19.19f 18.991 18.89( 19. I'J Dividends dalared $ I,020 $ 930 $ 852 S 760 $ 715 Shares outstanding - average (in thousands) 155,381 453,680 451,768 451,078 455,056 Share owrwr accounts - average 506,000 $20,000 501,000 502,000 514,000 Alarket price range per share S 73%-55% $ 59L48% $ 58%-15% $ 50-27 % 5 35-25 % Short-term borrowings S 1,297 $ 1,0 17 $ 1,016 $ 1,037 $ 1,171 Iong-term borrowings 753 753 915 1,015 1,059 Alinority interest in equity of consolidatal affiliates 128 129 168 165 166 Share owners' n;uity 13,901 12,573 11,270 10,198 9,128 Total capital invested S 16,082 S 14,502 S 13,369 5 12,415 $ 11,524 Return on average total capital investal 16.59; 17.99; 17.591 17.1 7 17.496 Total assets S 26,432 $ 21,730 $ 23,288 $ 21,615 5 20,942 Property, plant and equipment additions S 2,038 S 2,488 $ 1,721 $ 1,608 $ 2,025 Worldwide employment - average 301,000 330,000 310,000 367,000 401,000 Year-end orders backlog S 23,117 $ 22,577 S 20,589 $ 19,723 $ 21,005 Share data luve lxtn adjuwed for the Mor-1 sen k split in Apnl 1983. ......m....................... ..... ....... ..... ... ....... 10 5'4 9'4 10 0 M N N& " s lS ' e. t y , - 4, 4e5e. 0zE -
'Nw . a. , s ep .
19MI
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1982 19H REE 1984 19M5 r 44 (EEEE r 1981 19M2 19M) 1986 19Hs 32
l l 1
- Selected Financial Data provides both a handy successful leasing business has grown in recent >vars partly reference fbr some data frequently requested as a result of U.S. tax policy aimed at makmg American about GE and also a record that may be useful in review- business mere competitive by encouraging pn ductive in-ing trends. vestments in plant and equipment. Leasing from GECC o Operating margin as a percentage of sales has m.creasal has ofTeral a broad range of companies an attractive, cost-effective way to meet capital equipment nceds. llecause fbur consecutive years. A major trason for this improve-GECC bears the risks ofownership associatal with the ment has been the marked increase in pnxluctivity per ipment it leases to customers, GECC realizes invest-employee (see charts on page 25). This improvement stems from consistent, continuing emphasis on improving cost ment tax credits and the benefits of the Accelerated Cost Recovery System which Congress has established as tax struc ture, including substantial investment in better plant and ajuipment and highly selective resource allocation
- incentives. It is imp >rtant to remember that GECC's past and current leasing activities will result in significant tax-o Net earnings as a percentage ofsales has increasal con- able income in future years. The 1985 increase in the fu-siderably. Despite major economic and market variations ture obligation is included in the $772 million shown fbr in the last five >rars, GE's earnings have grown at a pace the effat of timing differences.
substantially greater than the earnings changes fbr the ag-e GE's discretionary ftmds available fbr acquisitions have gregate of the 400 companies making up Standard & been generated principally by asset sales from its restruc-Poors Index of U.S. industrial firms. GE's net earnings in 1985 were 519, more than they were m 1980, while the turing program, not from deferring federal tax payments. ssp 400 was virtually unchanged (only 2'J more than fbr GE and GEFS together generated ftmds from operations of 1980). The chart on page 25 shows GE's consistent earn- SE5 billion over the last five years. GEFS financings ings growth sm.ce 1980 compared with the erratic per- aggregated $8.8 bilh.on. These funds were usal to pay formance, mcluding lower earmngs m 1982 and 1983, fbr taxes ($5.6 billion), to invest in capital assets ($25.8 bil-the S&P industrial comp > site. lion, ncluding workm.g capital)and to pay,h. vi.dends to share owners ($4.3 billion). Of the capital investments, o General Electric's total tax position for 1985, including $9.9 billion was used in malernizing GE's own facilities. those affiliates which are consolidated for tax but not for Also, S 14.3 billion was invested in financing assistance financial reporting purposes (General Electric Financial provided by GECC to numerous companies to finance Services, Inc. and its two atTiliates, General Electric Credit their capital needs. Much of this latter investment was in Corp > ration and Employers Reinsurance Corporation), the form ofleasal ajuipment to companies that did not ibliows. have the financial resources to acquire equipment rxtded to operate their businesses. These investments generatal Total GE taxes Ibr the war endal tax credits and depreciation deductions of $3.4 billion, on nullions) thember 31. v>ss which effectively ofTset federal income taxes payable dur-Pnnision for U S tideralincome taxes: ing the period ofinvestment. However, the payment of Estimand amount payabic (GE and consolidarni federal taxes was merely postp ned and income pnxiuced Est tIl amount rum erable (nonmnsolidated rom these investments will result in higher taxes in future amlutes) m years. Thus, GE and GEFS together actually spent $ 1.4 Net U.S. ti-deralincome taxes payable 258 billion more than was generated from internal operations Etfa t of timing thtferentes and deferred investment and tax deferrals. The increase in discretionary funds avail-tax crethe 772 able of some $2.4 billion over this five-year period is at-lbral pnn nion for U.S. federal inmme taxes 1,030 tributable to major asset sales. All other taxes (Smial Saurity; foreign, state and local mcome; property arxl fran(hise; sales and use) 1,079 e inflation-adjusted results for GE are Presented in note
'Ibral taxes payable c urrently or in the f uture $2.109 nMM mmm bm m the Umted States has remained tively low levelsat rela % m E In 1985, GE (including both consolidatal and nonconsoli- for the past (ouqms, (Uustnwnts for in0ation haw not dated afliliates) provided an aggregate of $2. I billion for en as sigm6 cant as thosm@ncal in the late 1970s taxes of all types payable currently or in the future. an early 80s. Aldmugh inflation-adj,usted earnings are The amount of U.S. federal income taxes recoverable by a ways lowt7 than reported earnings, the generally pgitive nonconsolidated alliliates arises primarily from General trend in GE s reported earnings is also evident m earmngs Electric Credit Corporation's leasing activities. GECC's fter removing the effects ofinflation.
33
Summ rYcfInd:strY 50Nmonts "a "l ik '"n"'"r'"v and <onsohdared altilures l l l Ibr the >rars ended Ihember 31 (In millions) 1985 1984 1983 1982 1981 l l Eevenues (sales plus other income) l Consumer products $ 3,569 $ 3,858 $ 3,741 $ 3,943 $ 4,202 l hlajor appliances 3,617 3,650 3,078 2,751 3,132 l Industrial 4,571 4,274 4,228' 4,705 5,361 l Power systems 5,552 6,010 5,878 6,093 6,015 Aircraft engines 4,712 3,835 3,495 3,140 2,950 blaterials 2,459 2,241 2,060 1,791 2,050 Technical pnxlucts and services 5,197 4,803 3,823 3,546 3,005 Financial services 499 448 397 286 239 Natural resources - 609 1,579 1,575 1,722 Corporate items and eliminations (9G1) (792) (598) (638) (825) Total $29,272 $28,936 $27,681 $27,192 $27,854 Net earnings Consumer products $ 217 $ 228 $ 163 $ 146 $ 225 Alajor appliances 224 223 156 79 82 Industrial 143 73 84 148 212 Power systems 419 486 439 384 242 Aircraft engines 381 251 196 161 149 hlaterials 266 262 182 14 8 189 Tahnical products and services 261 232 210 218 144 Financial services 406 336 285 203 145 Natural resources - 117 301 318 284 l Unusual items 7 - - - - Corporate items and eliminations (18) 72 8 12 (20) Total $ 2,336 $ 2,280 $ 2,024 $ 1,817 $ 1,652 See piges 47-50 fi>r additional segment information. I Fiv> year not earnings growth rates (1981 85) by segeient Year end orders beeklog and tetel Cenopeny ($ billions) 30'V $24.0 e lu i ng arural JE 20 gg _ ,g[ 19,2 O n n r prmluc es J .
. 10 Li 14.4 hr r luc ts 0 "
. 9.6 OA ar pnes _ gg B All o<iar g C M.norappluntes 3 4g a 1%wersystems 7t gr ,,
O I mant ul sen kes B Airc raf t enpnes _ 7 ._
- 20 0 1981 19H2 1986 1984 1985 l
34
o - 1 Wee Summary of Industry Segments groups 1985 backlog. Included in power systems backlogs were: d General Electric's revenues and net earnings by the $2.0 billion for steam turbine-generators and $3.0 billion principal industries in which GE's various businesses par- for nuclear fuel, services and products. Approximately ticipate. These differ from the groupings by " circles" $0.8 billion and $ 1.9 billion of the December 31,1985, noted earlier in this Report. The circles focus on key busi- steam turbine and nuclear backlogs, respectively, were nesses in terms of strategy considerations involving re- scheduled for shipment five years or more in the future. source alk) cation and help to emphasize long-term goals. Additional financial details and informatmn about indus-e Censumer products earnings and revenues were 5% and 7W lower, respectively, in 1985 than in 1984. The try segments are included on pages 47-19. principal reason for lower 1985 earnings was the loss sus-o The five-war net earnings average annual growth rate tainal by consumer electronics, which had a profit in for GE, excluding natural resources, was 13.79. The 1984. Iosses reflectal significantly lower prices, stemming chart on page 34 shows how growth rates varied by seg- from an industrywide oversupply of color television sets, ment. (Data exclude the former natural resources segment which were ofTset only partially by productivity improve-because most of that segment consisted of the mining op- ments. Lighting earnings were up slightly on flat revenues erations of Utah International that w ere disposed ofin as programs to improve factory efliciencies continued to 1981 and 1985.) Economic conditions have afTected GE's have a beneficial impact. Reflecting cost takeouts and pro-businesses in ditTerent ways. Usually, those that are driven ductivity gains, mobile communications was modestly directly or indirectly by consumer purchases (such as con- profitable in 1985 following a loss in 1984. Revenues and sumer products, major appliances and materials) see a re- earnings of the battery business trailed 1984. cessionary impact almost immaliately in slackening sales, while those more oriented toward commercial and indus-e Maler appliance earnings and revenues in 1985 trial markets generally lag both an economic shwdown were about even with 1984. Domestic volume in 1985 and subsequent recovery. There was an economic recession s slimy acad of 1984's strong performance, but soft m the United States f rom the third quarter of 1981 to the U.S. markets resulted in lower prices and offshore sales last quarter of 1982. Also, U.S. economic performance dech.ned. Principal factors in much better profitability , s nce 2 have kn sharp impmvenna 3n pmductinty was sluggish
' during 1985, with generally soft consumer markets and continued weakness in many industrial nd excellent product quahty that reduces in-warranty markets. smice cosa.
A number of GE's businesses are not affected directly by e Industrialearnings in 1985 virtually doubled 1984 short-term recession and recovery but are affectal by dif- on 79c' higher revenues. The major contribution to the ferent economic cycles. These include much of the power much improved earnings came from factory automation - systems business (where long-term public utility order businesses, which twcame profitable in the latter part of trends are reflecting much lower growth in electrical hiad 1985 with an earnings improvement of $40 million for the demand than has been realizal historically); businesses year. Reflecting several years ofprogrammed actions to having a heavy national defense orientation, including improve efficiencies, transportation systems had much aerospace and military aircraft engines; and those operat- better earnings in 1985 on only slightly higher revenues. ing in unique markets, such as the rapidly changing and Construction equipment earnings also were much better in growing environments for financial services, medical sys- 1985 on a good sales increase. Motor carnings were up tems, information services and commercial aircraft en- somewhat on productivity gains partially offset by lower gines. Also, generally poor international markets, espe- volume. Iower volume and prices for semiconductors re-cially in Latin America, have prevaile 1 in recent years, and sulted in an increased loss in 1985. markets for U.S. exports have been increasingly battered by the non-competitive U.S. dollar. e Power systems earnings and revenues in 1985 were both 87c less than in 1984. With a long-term downward o Trends in orders backlogs are also charted on page 34. trend in domestic markets for heavy electrical generating Pnxlucts and services sold by GE have a wide range of apparatus, turbine and nuclear earnings were considerably I order-to-shipment cycles. Approximately 519E of the total below the previous year despite productivity improve-backlog of $23.1 billion at December 31,1985, is sched- ) ments. Construction and engineering services sales were uled to be shipped in 1986. Aircraft engine orders ac- down but earnings improved sharply as base costs were counted for $7.5 billion of the orders backlog at December lowered, particularly in offshore operations. Also, base 31,1985. Virtually all of the 1985 aircraft engine backlog cost reductions, coupled with somewhat higher volume in is to be filled during the next five years. Power systems meters and transformers, resulted in a good earnings im-orders accounted for $9.0 billion of the total year-end provement for power delivery in 1985. 35 _ _ _ _ _ _ _ _ _ _ _ )
o Alecraft engine earnings were up 529; in 1985 on
- D1nencial services earnings in 1985 again reached 230; greater revenues. Earnings leverage from higher nev highs on a 219; increase from 1981. General Electric 1985 volume more than offset continued large develop- Credit Corporation's earnings rose to $377 millian from ment costs for the CF6-80C, CFM-56 and Unducted Fan $320 million a year earlier on an 1897 increase in earning engines. Sales ofengines to both commercial and military assets that are principally investnwnts which provide pro-customers have risen steadily over the past five years. Sig. ductive capacity to firms other than GE. Employers Rein-nificantly higher earnings since 1980 reflect greater vol- surance Corporation experienced better property and cas-ume and have been achieved despite substantial research ualty markets in 1985 and contributed $36 million to and development expenditures and investment in plant 1985 earnings, after taking into account all costs of ac-modernization and capacity expansion, which are necessary quiring this leading reinsurer in mid-1981.
to provide and maintain pnduction efficiency and the ad- Unusual items in 1985 again had a negligible effect on vanced technology needed by all aircraft engine customers. the Company's net earnings. Corporate items and elimina-tions in 1985 were at normal levels following the inclusion o Motorials businesses earnings were 29( ahead of 1981 in 198-1 in this category of temporarily high interest in-on a 109; revenue increase. There was strength through-come from cash proceeds from the sale of most of Utah. out 1985 in automotive markets for high-performance plastics, although other plastics markets were weak, and
- GE's exports to external customers totaled $3.3 billion total plastics earnings were up slightly. In engineered ma- in 1985, up slightly from 1981. The chart below shows terials, earnings were otTin all businesses as lower volume the major contributors to GE's exports fi>r the past five and prices in 1985 more than ofTset pnductivity improve- years. Aircraft engines have grown substantially in impor-ments.12dd Petroleum carnings in 1985 more than offset tance since 1982, while power systems products have de-start-up h>sses incurred in ceramics. clined since the peak in 1983. Expc,rt margins overall have been declining due to the continued impact of the non-o Technical products and services earnings and ,
com;wthive U.S. dollar vis-a-vis many foreign currencies revenues in 1985 increased 139; and 87f , respectively, and worldw ide competition for today s sophisticated tech-g>m the previous year. Aerospace had sharply higher earn-nological otTerings. Export sales by major world areas can ings on improved cost performance and a good revenue be found on page 50. Unfilled export orders of S 1.7 bil-increase. Medical systems results, reflecting a shift in em-lion at the end of 1985 were about the same as in each of phasis to magnetic resonance (MR) imagmg as markets for the two pdor years. computed tomography have matured, were slightly ahead of 198-1, which had twen atTected by substantial . GE's contribution to the U.S. balance of trade continues start-up costs for the newer technology. Information serv- to be positive. 'Ibral exports (S 1.0 billion in 1985) include ices, whose markets are continuing to change rapidly be- sales to external customers plus exports to affiliates. Total cause of new technologies and communications deregula- imports aggregated S 1.<1 billion in 1985, for a net positive
- tion in recent years, had flat earnings on somewhat lower balance of $2.6 billion.
j sales. Interactive yraphics operations (Calma Company) GE's total international operations (exports plus foreign had lower revenues and sustained a much higher loss in afliliates) had revenues of $7. I billion and net earnings of 1985, reflecting management's actions to redirect the busi- $351 million in 1985 compared with revenues of $7.7 bil-ness with greater emphasis on research and development. lion and net earnings of S 119 million in 1981. et.s.. p.res . .me.r.. ..s,. .es s.a.... .# er.d. ($ billi.ns) ($ billi.ns) 54 o st5 I L = L2 A L6 m e m.: .- . e-- , a e AS g A,S
.som & b h $ h 2. 7 m r 7
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v 19N1 19MJ 19M IVML 19M 19MI DH2 19M 1944 1985
St tantnt of Fin nci:1 Rmpcncibility l To Share Owners of General Electric Conspany highest standards ofconduct and practices with respect to The financial information in this Report, including the transactions with the United States government was re-audited financial statements, has been prepared by General affirmed in a written policy in 1985. This policy and re-Electric management. Preparation of these statements and lated vigorous actions emphasize to all employees that data involves estimates and the use of judgment. Account- esen the appearance ofimpropriety can erale public confi-ing principles underlying the financial statements are gen- dence in the Company and in the government procure-erally accepted in the United States and are consistent with ment process. Ongoing education, communication and re-standards issued by the International Accounting Stand- view programs are designed to create a strong compliance ards Committee. However, in a few important instances, environment and to make it clearly understood that devia-which are commented on in note 1 on page 38, there is no tion from Company policies will not be tolerated, single sncified accounting principle or standard. Where Peat, Marwick, Mitchell & Co. provide an objective, management makes a choice from reasonable, accepted al- independent review of management's discharge ofits obli-ternatives, it uses methods which it believes are prudent gations relating to the fairness of reported operating results for G E. and financial condition. Their report for 1985 again took To safeguard share owner assets, it is important to have no exceptions to the Company's financial statements. a sound but dynamic system ofinternal financial controls The Audit Committee of the Board (consisting solely and pnmfures which balances benefits and costs. One of of Directors from outside GE) maintains an ongoing ap-the key elements of GE's internal financial controls has praisal, on behalf of share owners, of the efTectiveness of been the Company's success in recruiting, selecting, train- the independent public accountants, the Company's staff ing and developing professional financial managers. Their of corporate auditors and GE management, with respect to responsibilities include implementing and overseeing the preparation of financial statements, and of the adequacy of tinancial control system, reporting management's steward- internal financial controls. The committee also reviews the ship of the assets entrusted to it by share owners, and accu- Company's accounting policies, internal accounting con-rate and proper maintenance of the accounts. trols, and the Annual Report and proxy material. Management has long recognized its responsibility for conducting the Company's affairs in an ethical and socially responsible manner. The commitment to this responsi- - bility is rethcred in key written policy statements. These cover, among other subjects, potentially conflicting out. Dennis D. Dammerman John E Welch,Jr. side business interests of employees, compliance with anti. Senior Vice President Chairman of the Board and trust laws and proper domestic and international business I m nce Chief Executive Officer practices. General Electric's intention to maintain the rrbruary 14, 1986 Report of Independent Certified Public Accountants To Share Owners and Board of Directors of in our opinion, the aforementioned financial statements General Electric Conspany appearing on pages 26, 28, 30 and 38-51 present fairly We have examined the statement of financial position of the financial position ofGeneral Electric Company and General Electric Company and consolidated atiiliates as of consolidated afliliates at December 31,1985 and 1984, December 31,1985 and 1981, and the related statements and the results of their operations and the changes in their of earnings and changes in financial position for each of the financial position for each of the years in the three-year
>rars in the three-year period ended December 31,1985. perial ended December 31,1985, in conformity with Our examinations were made in accordanu ith generally generally accepted accounting principles applied on a con-accepted auditing standards and, according ,, included sistent basis.
such tests of the accounting records and such other audit-ing procedures as we considered necessary in the M/ circ umstances. g; 345 Park Avenue, New York, N.Y.10154 t l'ebruary 14, 1986 l l 37
Notesto FinanslalStatenments G w e! k 8 i Summary of significant accounting were capitalized and subsequently amortized over the pro-(policies ductive life of the property, commencing with the start-up ofproduction. o Consolidation. The Gnancial statements represent the adding together of General Electric Company and all com- e Pensions and other retiree benefits. Accounting policies panies, except rinancial services companies, which GE for pensions and other retirement benents are discussed in controls through a majority interest or otherwise ("atTili- note 4. atal companies"). The efTect of transactions among related companies is eliminated. ,, The principal financial services atliliate is General Proposeal acquisition Electric Financial Services, Inc. (GEFS), a wholly owned company which in turn owns all of the stock ofGeneral On December 11,1985, the Boards of Directors of Electric Credit Corporation and Employrrs Reinsurance , Corporation. These financial services companies are so dif. General Electric Company and RC A Corporation (RCA) ferent from the other GE companies that their financial pproved de6nitive agreement by which GE wdl acquire statements are more understandable if shown separately. RCA through a merger. RCA share owners subsequently Therefore, separate condensed statements of GEFS are approved the agreement on Frbruary 13, 1986. Under the shown in note 14 and the nonconsolidated financial serv _ terms of the agreement, GE wdl pay $66.50 a share m ices atriliates are included on the equity basis as "one line" cash, totahng approximately S6.3 bilhon, for outstanding , in other investments in the Statement of Financial Position shares of RC A common stock. GE wdl also pay approxi-and in other income in the Statement of Earnings. ately S 148 milhon m cash for outstanding shares of two Companies in which GE owns between '07 and 507 ci sses of RCA preferred stock. GE also has receivea op-(" associated companies") are also included on a "one line" tions to buy an aggregate of 28.3 milhon shares of pres-basis. ently unissued RCA common stock for $53.125 per share exercisable at GE's discretion upon the occurrence of cer-o Sales. A sale is recorded only when title passes to cus- tain events. As part ofa proposed settlement oflitigation tomers or when services are performed in accordance with which includes a challenge to the validity of these options, contracts. upon obtaining judicial approval, the option price would o Investment tax credit (ITC). The ITC for each year is be increased to $59.75 per share. deferred and then amortized as a reduction of the provision Financing for consummation of the merger is planned for income taxes over the lives of the facilities to which the to come from a combination ofinternal funds and external credit applies. bormwings. The terms on which external funds would be obtained and the sources involved have not yet been deter-o Inventories. The values of most inventories are deter- mined. Combined short-term and long-term borrowim;s ' mined on a last-in first-out, or LIFO, basis and do not to 6 nance the acquisition are expected to be between exceed realizable values. 35.0 billion and S6.0 billion. o Depreciation, depletion and amortization. The cost of Completion of the merger is subject to certain remain-most manufacturing plant and equipment is depreciated ing conditions, which include review or approval of the using an accelerated method based primarily on a sum-of_ transaction by various governmental agencies and receipt the-years digits formula. If manufacturing plant and f approval from the Federal Communications Commis-equipment is subject to abnormal economic conditions or sion. It is anticipated that the transaction will be com-obsolescence, additional depreciation is provided. The pleted in the second halfof 1986. full-cost accounting method is used for oil and gas proper-ties. The cost of mining properties of Utah International Inc. was depreciated, depleted or amortized mainly by the unit-of-production method. Mining exploration costs were charged directly to expense until development of a specific mineral deposit was likely to be economically feasible. After such determination, all related development costs I m !
l en W. } tion, as a percentage of the average carrying value of the j D, Operating costs portfolio was 11.5% in 1985,10.3% in 1984 and 10.8% { Total operating costs, summarized by the principal objec- I" I983-e A mnipaison of the present value of Pension Man bm-tives for which the expenditures were made, are shown in fits with carrying value of Trust assets is shown m, the the table below. The table also shows selected supplemen-tal details ofcertain ongoing expenses. table below. Operating cost deteils General Mostric Pension Plan (In millions) 1985 1933 3933 December 31 (In millions) 1985 1981 1983 Employee compensation, Present value of benefits attributed to including benefits $10,468 $10,939 $10,500 **P I )ee semce e date, recogninng Materials, supplies, services PM' ' *P""'"'*"" '#"" I' ' and other costs 13,688 13,311 12,476 Carrying value ofTrust assets 10,921 9,701 8,590 Ilpreciarmn, depletion and Unfunded benefit obligation $ 674 $ 1,412 $ 2,014 amortization 1,226 1,100 1,084 Persons rweiving pensions Taxes, except Social Security at 3rar end 111,200 103,800 97,800 and those on income 247 261 317 Irss increase in inventories The funding program and Company cost determination Juring the >ur (279) (512) (129) for the Pension Plan use 8.07 (7.5% in 1984 and 1983) Total operating costs $25,350 $25.102 $21.21s as the estimated rate of future Trust income, except for the Supplemental details: effect ofa dedicated portfolio. This fixed-income portfolio, Company-funded research and consisting ofsecurities backed by the U.S. Treasury, was development $1,069 $1,038 $919 Maintenance and repairs dedicated in 1984 to the payment ofcertain future pension 692 741 882 Social Saurity taxes benefits. The carrying value of Trust assets at the end of 626 616 579 Advert smg 367 356 363 1985 included $935 million for this portfolio. The 13.4% g ggg g ,g ; determining the present value of plan benefits. The change in the estimated rate of future Trust in-Pensions anal other retiree benefits come, the full-year impact of the dedication, and amorti-
~n' zation of continued favorable Trust income experience were General Electric and its consolidated affiliates sponsor a the principal causes of the 1985 reduction in pension number of pension plans. The costs of these plans were msts. Pension mst as a [mentage of mmpensanon was
$496 million in 1985, $603 million in 1984 and $643 5.97 m 1985 (6.97 m 1984 and 8.1% m, 1983). million in 1983. e The General Electric Supplementary Pension Plan, an o General Electric Pension Plan (the " Pension Plan")is unfunded plan providing supplementary retirement bene-the most significant pension plan and substantially all em- fits primarily to long-semce professional and managerial playees in the United States are participants. The pro- employees m the Umted States, is another significant jected unit credit method, which recognizes the effect of pl n. Changes in prior-service costs along with other gains future compensation and service of employees, is used to and losses are amortized over a pen,od of 20 years. Current determine trust funding and pension cost. Changes in pen- service costs and amortization are charged to costs cur-sion benefits allocable to previous service ofemploges give rently and re recorded as Company liabilities. rise to prior-service costs which are amortized over 20 e A calculation and disclosure of the present value of accu-years. Gains and losses which occur because actual experi- mulated plan benefits is required by Statement of Financial ence differs from amounts assumed are amortized over 15 Accounting Standards No. 36 (SFAS 36). The SFAS 36 years. benefit amounts shown on the following page differ from Pension Plan benefits are funded through the General the data shown earlier in this note for the General Electric Electric Pension Trust (the " Trust"). The " carrying value" Pension Plan because the SFAS 36 amounts are based only ofinvestments is amortized cost plus recognition of appre- on compensation and service to date (i.e., they exclude the ciation in the common stock portfolio on a systematic basis which does not give undue weight to short-term market fluctuations. Investment income of the Trust, in-ciuding systematic recognition of common stock apprecia-39
expected effect of future compensation and service) and o Retiree health care and life insurance benefits. General because benefits applicable to the Supplementary Plan are Electric and its affiliates have a number of plans providing included. In addition, the table below shows the current retiree health care and life insurance benefits. The cost of value of Trust assets plus accruals. General Electric be- the principal U.S. plans was $74 million in 1985 and lieves funding comparisons for the Pension Plan shown $ 138 million in 1984. A reduction in life insurance re-earlier in this note are more realistic because the benefit serve requirements attributable to an updating of mortal-amounts include the expected effect of future compensa- icy assumptions was the principal cause of the decrease. tion and service, and because Trust assets are valued on a Generally, employees who retire or terminate after qual-basis which reduces the impact of short-term market fluc- ifying for optional early retirement under the General tuations. The interest rate assumptions used in determin- Electric Pension Plan are eligible to participate in retiree ing the present value of benefits are the same as discussed health care and life insurance benefit plans. Health care previously for the Pension Plan. benefits for medical and dental expenses incurred by eligi-ble retirees under age 65 and eligible dependents are in-
**"*3 '3***3* P'"*3*" P3*" *"d cluded in Company costs as covered expenses are actually SvPPl enientary Pension Plan . .
mcurred. h.>r eligible retirees and spouses over age 65, Decemter 3 I (In millions) 1985 19st 1985 scheduled hospital benefits which supplement Medicare f[ul p PnQ t and scheduled prescription drug benefits are provided, and Vesad bem-6ts S 8,761 $ 8,331 $ 7,939 the present value of future benefits is funded or accrued by l Non-vesasi berr6ts 741 709 557 the Company and included in Company costs in the yrar l Total accumulaml Irne6ts $ 9,508 $ 9.010 $ 8,496 the retiree becomes eligible for benefits. The present value Current value ofTrust assets oflife insurance benefits for eligible retirees is funded and plus accruals $14,727 $11,695 $10.172 included in Company costs in the yeat retirement. Most retirees outside the United States are covered by The change in the estimated rate of future Trust income in government programs. Accordingly, the Company's direct 1985 reduced the present value of total accumulated bene- cost for non-U.S. retiree health care and life insurance is fits by $457 million. Partially offsetting this reduction not significant. was the impact of 1985 Plan amendments. The current value of Trust assets includes unrecognized appreciation of rm S3,438 million, principally resulting from strong invest- COtleerincense ment market performance during the last four years. ve, o Condensed financial statements fhr the General Electric (In millions) 1985 1981 1983 Pension Trust, which are not consolidated with those of . Net earnings of General Electnc the Company, fbilow. Financial services. Inc. $113 $329 $271 General Electric Pension Trust I"C""* ff"* f Marketable securities and bank Net essets at current value deix> sits 258 323 239 December 31 (In millions) 1985 1981 19s5 Royalty arxl technical agrwments 78 83 58 Cunomer Gnancing (>6 75 69 U.S. government obligations A'S"'E#d ' *Pd"IC5 37 33 59 and guarantees $ 2,785 $ 2,238 $2,001 Other investments; interest 23 19 28 Girporate tunis arxl notes 1,770 1,076 1,0 47 Dividerxis 1I 11 11 Real estate and mortgages 1,660 1,976 1,341 Other sundry items 101 116 149 Common stocks and other aluity securitics 7,5 11 5,782 5,180 $987 $989 $881 13,756 11,072 9,562 ! Cash and short-term investnrnts 514 145 256 ., Ot her assets - tre 92 1H 68 f. > Net assets $14,362 $11,150 $9,886 lvvleterest and other financial clierges ch. e in n.9.s t. .e ..re.nt v sve Ibr the par (in millions) 1985 19s i 1983 Interest Capitalized on major property, plant and equip-Net assets at January 1 $1I,350 $ 9,886 $8,410 ment and real estate development projects was $33 million Company contributions 431 503 515 in 1985, $22 million in 1984 and S19 million in 1983. Emploge contnbutions 107 101 87 Investnrnt income 1,176 931 857 lieneGts paid (197) (121) (376) Unrecognized portion of change in (urrent value 1,792 350 333 Net assets at December 31 $14,362 $11,350 $9,886 l 40
CT Jfe'eusualitenes retained properties at December 31,1984, is shown under LJ natural resources in note 23. Natural resources operating { Unusual items include pretax gains from certain asset sales results for 1984 as summarized on page 34 include reve-nues of $373 million and net earnings of $70 million, and pretax expense provgions for costs ofseveral ditTerent types of transactions. Gams from sales of assets which representing total revenues and net earnings of Utah for the first quarter, while results for the remainder of 1984 management has determined are not complementary to the Company s future business focus were $518 milhon in are only for the properties owned subsequent to the sale. 1985,5617 milhon m 1984 and $ 117 milh,on in 1983. The 1984 gain from the Utah transaction was $500 mil-Total unusual expenses aggregated $540 milhon m, 1985, lion before taxes and after providing for future contractual obligations'
$762 million in 1984 and $ 147 million in 1983. Details of these unusual gains and expenses follow. Pretax gains Sale of GE's small household appliance operations, both have been less than pretax charges for each of the last three donwstically and abroad, to The Black and Decker Manu-years. However, because ofdiffering income tax rates ap- facturing Comp.my (Be D) in April. Small appliance oper-plicable to the various transactions, the effect on the Com- ations accounted for less than 27 of GE's consolidated pany's earnings after taxes was negligible in all three years. sales. This transaction did not include any ofGE's other consumer pnducts lines. GE receival cash, three million o Unusualgains in 1985 arosefnant sMs of B&D stock (one-half of which were subsequently Sale of the 15.50f interest in Australian coal properties sold in January 1986) and approximately $50 million in a which had been retained at the time of the disposition in three-year note. GE has agreal not to sell the remaining 1984 of most of Utah International Inc. The 1985 sales B&D stock, except in certain circumstances, nor to pur-were to three buyers for cash amounting to $387 million chase additional B&D stock until 1987. The note was and occurral in the second and third quarters. The gain intcrest-free for the first year and bears interest of 99f from these three transactions was $247 million before annually thereafter. The gain from this disposition was taxes. The contribution to GE's operating results from $28 million twfore taxes and after providing for future these interests during the portion of 1985 prior to their contractual obligations.
disposition was not significant' Merger of General Electric Cablevision Corporation in the Disposition of the remaining 379; of GE's interest in the fourth quarter of 1984 into a subsidiary of Unital Artists cablevision company into which GEi former cablevision Cablesystems Corporation (Cablesystems). In this transac-operations had been mergal in 1981. The 1985 transac- tion, GE receival cash and 379F of the stock ofCablesys-tion was completed in December for a pretax gain of $ 132 tems. Cablevision operations have been minor in relation ; million. Payment included $43 million in cash and a non- to GE's total results. The gain on this transaction was interest-bearing note due one year from closing, or earlier $89 million before taxes and after providing for future con-ifcertain events occur. Earnings from this investment tractual obligations. prior to disposition were an insignificant portion of GE's total 1985 results. e Unusualgains in 1983 came from the divestiture of all { but one of the Company's radio and broadcasting television i Other transactions resulting from adjustments to previous stations (S81 million) as well as sale of the Company's unusual disposition provisions. These aggregated $ 139 { minority position in Gearhart Industries ($36 million). j million before taxes in 1985. e Unusualcosts indade defidiouing: o Unusualgains in I984 indaded: Expense provisions to cover corporate restructurings - Sale of most of Utah International Inc. to The Broken Hill S447 million in 1985, S636 million in 1984 and S147 Proprietary Company Limited (BHP) in a transaction val- million in 1983. These represent the provisions for ex-ued at $2.4 billion, representing the cash proceeds from penses of refocusing a wide variety of business and market-the sale as well as the value of the 15.59/ interest in ing activities and reducing foreign and domestic risk expo-several Australian coal properties which the Company re- sures. These provisions include costs of rationalizing and tained and subsequently sold in 1985. (GE also retained improving a large number of pnxluction facilities, re-Ladd Petroleum Corporation, formerly a wholly owned arranging production activities among a number ofexisting Utah affiliate.) GE's share of the total assets of new and plants, and reorganizing, phasing out or otherwise con- ! ciuding other activities no longer considered essential to the conduct of the Company's business. Special cash payment to certain employees in 1985 -
$93 million. The payment was equal to 39f of normal straight-time annual earnings inJuly 1985 to hourly l 41
union employres, in accordance with new union contracts, lease periods (as are investment tax credits usable cur-and also to certain other hourly and non-exempt salaried rently). For tax purposes, they will be offset against taxes cmplo>res. The total payment aggregated $ 103 million payable in the future. and was reflected as an unusual expense for the quarter or ported in financial statements in dif-e was capitalized in inventory, depending on emplo>res ferent years than they are included in tax returns. Deferred work assignments, with inventoried amounts recorded as taxes are provided on these timing differences as summa- . expense when the inventories are sold. g Revaluations ofgoodwill and intangibles. In 1984, good-will and intangibles were revalued downward by $ 126 ' mil- E **'I"'3*88N"*** *" Ud*
. . Incense teues lion to recognize the rapid changes occurrm.g m certam Increase (decrease)in provision technology businesses. for income taxes (In millions) 1985 1984 1985 Tax over txxik depreciation $ 121 $ 168 $ 54
(% Margm on installment sales 48 23 28 24 (8) (5) NProvision forinconie taxes Provision for warranties Qd # Provision for pensions (171) i15 (47) (302) 12 (58) (In millions) 1985 1984 1983 ' Other - net $ 139 $(129) ) U.S. federalincome taxes: Estimated amount payable $ 842 $ 1,051 $657 Other- net reflects a number ofindividual timing differ-Effect of timing difTerences 139 (129) (5) ences, including those related to various portions of trans-Investment credit deferm!- net 35 41 5 actions involving business dispositions, restructuring ex-1.016 m 657 pense provisions and reductions ofintangibles. Fureign income taxes: Estimated amount payable 135 143 263 e Investment tax credit amounted to $111 million in Effect of timing ditTerences (4) (85) 10 1985, compared with $ 110 million in 1984 and $72 mil-131 58 273 lion in 1983. In 1985, $76 million was included in net Other(principally state and kical earnings, compared with $69 million in 1984 and $67 income taxes) 45 44 45 million in 1983. At the end of 1985, the amount deferred
$1,192 $1.065 $975 which will be included in net earnings in future years was All General Electric consolidated U.S. federal income tax returns have been closed through 1972. R*****lE*'l*a fron' 2 :ri'* *ff**'Iv' insense tax rates o Provision has been made for U.S. federal income taxes to 1985 1984 1983 be paid on that portion of the undistnbuted earnings of U.S. federal statutory rate 46.0% 46.07 46.0%
affiliates and associated companies expected to be remitted Reduction in taxes resulting from; to the parent Company. Undistributed earnings intended varying tax rates ofconsolidated to be reinvested indefinitely in affiliates and associated affiliates (including DISC and FSC) (3.6) (3.8) (5.9) inclusion of GEFS eamings in before-tax companies totaled $964 million at the end of 1985,
$90 I n at the end of 1984 and $ 1,598 million at the 3,(,7,,],];f" (5 (2
- 2. (
(0.6) Unusual items (varying tax rates) (0.5) (2.3) o General E!ectric Financial Services, Inc. (GEFS)is a Income tax at capital gains iate (0.2) (0.3) (0.6) nonconsolidated affiliate for financial reporting but is in- Other - net (0.6) (1.3) (0.5) cluded in General Electric's consolidated U.S. federal in. Effective tax rate 33.7 % 31.7 7 32.17 come tax return. Taxes payable by the consolidated compa-nies shown in the preceding table exclude the effect of e Based on the location of the component furnishing significant tax cred .s and deductions of GEFS, which goods or services, domestic income before taxes was arise primarily from leasing activities. GE and GEFS to_ $3,339 million in 1985 ($3,025 million in 1984 and gether had net taxes payable for 1985 and 1984 following $2,364 million in 1983). The corresponding amounts for a net recoverable amount in 1983. Existing leases of GEFS foreign-based operations were $201 million, $331 million will generate taxable income in future years which is pro _ and $669 million in each of the last three years, respec-vided for in the deferred income taxes of GEFS (see note tively. Provision for income taxes is determined on the 14). At December 31,1985 and 1984, investment tax basis of the jurisdiction imposing the tax liability. There-credit carryforwards totaling $358 million and $92 mil. fore, U.S. and foreign taxes shown previously do not com . lion, respectively, were recorded by GEFS as a partial offset pare directly with these segregations. to deferred taxes. For financial reporting purposes, these carryforward amounts are amortized to earned income over 42
\
6Q k Cash and nearketable securities DQ
! Preporty, plant and esquipnient u L3im z.3 '
Deposits restricted as to usage and withdrawal or used as (In millions) 1985 198 I partial compensation for short-term borrowing arrange- Alajor classes at IAremlu 31: ments were not material. Alanufacturing plant and equipment Carrying value of marketable securities was substan- Land and improvements $ 178 $~ 181 tially the same as market value at year-end 1985 and 15aildings, structures and related 1984. Equity securities in the portfolio were carried at a '4"'P*'"' 3'4 39 3 l78 cost of $206 million and $56 million at December 31, Alachinery and equipment 10,218 9,'353 Irasehold costs and manufacturing plant 1985 and 1984, respectively. under construction 906 823 Oil and gas properties 1,351 1,234 7y
$ 16,102 $ 14,769 3.i Curr*est receivables Cost atJanuary I $ 14,769 $14,806 j, .
vJ W Additions 2,038 2,488 December 31 (In millions) 1985 19s g Npositions (678) (2,509) e nges (27) (16) Receivable from: Customers $ 1,571 $ 1,259 Cost at December 31 $ 16,102 $ 14,769 Associated companies 114 115 Acconewleted f:;m' 9;;, - Nonconsolidated afliliates 15 50 d*P lotion and ensortization Others 1,141 1,173 Ilalance arjanuary 1 $ 7,079 $ 7,109 6,134 5,602 Current-) tar provision 1,226 1,100 less allowance for losses (9 I) (93) Dislusitions (536) (1,163) Other changes 5 33
$6.010 $5.509 Balance at IXtember 31 $ 7,774 $ 7.079 Property, plant and egelyneent r r ': less depreciation, f:;MI:n and
$ 8,328 $ 7,690
)]Inventeries uw
"""'"*"***"d31 m ,.m December 31 (In millions) 1985 19s 4 6 4m 1 Raw materials ark! work in process $3.618 $3,511 Finished goods 1,926 1,936
[ Fund 8 held for bu83n*88 d*v*l*Panent L's - Unbilled shipments 261 247 5,805 Funds held for longer-term future business development ! 5,697 Irss revaluation to LIFO (I,856) (2.027) are invested in a variety of securities, principally state, UFO value ofinventories county and municipal bonds and corporate preferred \
$ 1.919 $ 3.670 stocks. Estimated realizable value of these investments was )
About 8591 of total inventories is valued using the LIFO ' methai ofinventory accounting. m -, 1 ~. '1 . , t o LIFO revaluar ons were $ 171 million lower at year-end i Other investneents 1985 than at year end 1984, compared with decreases of Lj" v;4
$ 125 million and S 114 million during 1984 and 1983, respectively. Of the decrease in 1985, $ 128 million was u"u" 3 I (I" "i"i""'I 985 '984 because oflower inventory !:vels, principally in power Nonconsolidated financial services affiliates $2,311 $1,898 systems. The remainder of the 1985 reduction was due to Asniated companies 293 427 net current-year price decreases. In 1984, decreases arose AlisceHaneous investments (at cosO:
from lower inventory levels (S 157 million, of which S32 Govemnm and governnm-guaranteed million was related to business dispositions), partly offset by higher prices ($32 million). In 1983, decreases arose g{""" @ $ i
$g~, g (
from S 132 million lower inventory levels, partly offset by higher prices ($ 18 million). hlarketable cquity securities 81 130 less allowance for losses (37) (24)
$3,150 $2,903 investments in nonconsolidated affdiates and associated companies included advances of $ 15 miEion at Decem-ber 31,1985 ($33 million at December 31,1984).
l l 43
( o During 1984, General Electric formed a new' wholly e ,.I mieswis yinensiel servi es, Inc. owned, nonconsolidated af61iate, General Electric Finan- Finansiel; r'-"x cial Services, Inc. (GEFS). GEFS includes General Electric thember 31 (In millions) 1985 1984 Credit Corporation (GECC), formerly a wholly owned, Financing receivables: nonconsolidated Gnance subsidiary of GE, and Emplo>rrs Time sales and loans, net of deferred income $ 11,851 $ 10.087 investment in Gnancing leases 7,267 5,922 Reinsurance Corporation (ERC), which was acquired by 19,121 16,009 GEFS onJuly 2,1984. The transfer of GECC to GEFS was accounted for by combining the assets and liabilities Allowame for lees 092) 006) Financing receivables - net 18,629 15,603 of GECC with GEFS at historical cost. The GEFS au guisi. Cash, short-term investments tion of ERC was accounted for as a purchase. During the
""'i g[ * ';f",' bl nornr1 course of business, GEFS and its affiliates have minor transactions with General Electric Company and Equipment on operating leases- net 1,113 1,013 certain ofits consolidated af61iates. Virtually all products Other assets 1,539 1,446 financed by GECC are manufactured by companies other Total assets $25,610 $21,421 than General Electric. GEFS is included in GE's consoli- Notes payable:
dated U.S. federal income tax return. Condensed consoli- Due within one 3rar $ 11,563 $ 9,331 dated financial statements for GEFS follow. Long-term 4,830 4,071 Pro forma net earnings of GEFS for the years 1984 and Reserves ofinsurance afEliates 2,018 1,974 1983, assuming acquisition of ERC had been completed Other liabilities 1,265 1,031 at the beginning ofeach of those years, would have been Totalliabilities 19,706 16,407 about the same as amounts actual!y reported. Deferred income taxes 3,581 3,088 More information about GECC is available in its an- Defeued investment tax credits 51 52 nual report, which may be obtained from General Electric capital stock I i Credit Corporation, P.O. Box 8300, Stamford, Conn. Additional paid-in capital 1,152 1,152 06904. Complete GEFS financial statements are in GE's Retained earnings 1,139 726 Ihrm 10-K (see page 59 for availability). Unrealized gain (loss) on securities held by insurance af61iates 10 (5) General sleswis Finansiel Services, Inc. Equity 2,302 1,874
** * #8' " *** #*** " ' '
var 1 ) 1985 1941 1983 Eamd income $3,805 $2,933 $ 1,M9 e Miscellaneous investments had an estimated realizable Expenses: Interest and discount 1,339 1,123 856 value about the same as cost at )rar-end 1985 and 1984. Operating and administrative 978 763 571 e Marketable equity securities are carried at cost. Aggre-Insses and policyholder benefits of gate market value of marketable equity securities was insurance affiliates 876 583 92 $209 million and $267 million at year-end 1985 and Provis o m es 1984, respectively.~ At December 31,1985, gross unrea1 85 09 109
- other assets 3 1 1 ized gams on marketable equity securities were $ 137 m,d -
3,381 2,579 1,629 on an gmss unma osses wm $ mWion. Earnings before income taxes 424 354 320 Provision for income taxes (l1) (25) (49) P f"23 Net camings 413 329 271 b ,G88495 Irss dividends - - (217) gj g / Retained earnings atJanuary I 726 397 343 Retained earnings at December 31 $1,139 $ 726 $ 397 long-term receivables $ 549 $ 586 Recoverable engineering costs on government contracts 422 349 Real estate development projects 181 159 Deferred charges 124 131 Goodwill 117 145 Ucenses and other intangibles 105 107 Customer financing 94 100 Deferred income taxes - 128 Other , 90 66
$1,682 $1,771 Deferred income tax credits of $35 million are included in other liabilities in 1985.
44
T
- w. , m,,
L.4 - i 4 3 l Sleert-forse borrowings ; Other sests emel expenses accreasi O\ J J ~~ : Daember 31 on millions) 1985 19s t The balances at year-end 1985 and 1984 included com-Avenge Awage pensation and benefit costs accrued of $756 million and are at are at
$769 million, respectively.
Amount Dec. 31 Amount I ec. 31 General Electric Company: Notes with trust 'm r
# #- C -
departments $ 301 7.57 $ 291 8.0% %=terga brreWings Commercial paper 50 7.9 Consolidated affiliate bank borrowings Outstanding Due p 601 31.6 565 30.3 Other, including current December 3 I (In mdlions) 1985 1981 date period portion oflong-term General Electric Con.pany: borrowings 342 191 5 %% Notes $ 32 $ 38 1991 1972-90
$ 1,297 $ 1,n17 5.307 Debentu es 34 34 1992 1973-91 7h7 Debentures -
95 1996 1977-95 8%W Delrntures 217 217 2001 1985-03 o Other borrowings at December 31,1985, included Industrial Development
$ 170 million of repurchase agreements. These agreements Bonds 251 152 various represented a kun by GE of U.S. Treasury Notes (classihed General Electric Overseas as current marketable securities of $ 162 million) in connec- Capital Corg oration:
tion with the borrowings. Other borrowings also included 4 h9' Debentures 14 29 1987 None amounts from nonconsolidated affiliates of $89 million at 5h7 Sterhng Dollar December 31,1985 ($78 million at December 31,1984). 6' " 3,"y ['"*d 2 2 1993 None o The average balance ofshort-term borrowings, exclud_ All other 203 186 ing the current portion oflong-term borrowings, was $753 3753
$ 1,391 million in 1985 (calculated by averaging month-end balances for the year), compared with an average bal-
- The Company's obligation for the 7 %% Debentures due ance of $883 million in 1984. The maximum balances in in 1996 was extinguished in 1985 by placing certain U.S.
these calculations were $ 1,813 million and $ 1,046 mil. govemment obligations in an irrevocable trust dedicated lion at the end ef September 1985 and March 198 4, re. solely to payment of principal and interest on the deben-spectively The avera;e worldwide effective interest rate tures. The gain from this transaction was immaterial. for the year 1985 was 15% and for 1984 was 20%. These e Borrowings of General Electric Overseas Capital average rates represent total short-term interest incurred divided by the aveiage balance outstandmg. Corporation (GEOCC) are unconditionally guaranteed by General Electric as to payment of principal, premium (if o Although the total unused credit available to the Com_ any) and interest. Borrowings included 5 %% Sterling / pany through banks and commercial credit markets is not Dollar Guaranteed loan Stock due in 1993 in the amount readily quantifiable, confirmed credit lines of approxi_ off1 million ($2 million), convertible into GE common mately $ 1 billion had been extended by about 60 banks at stock at $36.75 a share. Requirements for the maximum year-end 1985. Substantially all of these lines are available number of shares for GEOCC convertible debt (422,000 for use by GECC and General Electric Financial Services, shares at December 31,1985) may be met either from Inc. in addition to their own credit lines. unissued shares or from shares in treasury.
- All other long-term borrowings include a variety of R R ~" borrowings by affiliates and parent components with various
' Acceents payable interest rates and maturities. Amounts due to nonconsoli-i;e >
dated affiliates were $6 million at the end of 1985 and 1984. December 31 (In millions) 1985 1981 e long-term borrowing maturities during the next five Trade accounts $1,757 $ 1,614 years, including the portion classified as current, are $75 Collected for the account ofothers 180 179 million in 1986, $103 million in 1987, $32 million in Due to nonconsolidated amliates 267 108 1988, $80 million in 1989 and $57 million in 1990. 32,204 $1.931 These amounts are after deducting debentures which have been reacquired for sinking-fund needs. 45
_m, u- 8 /
~ ;Sliere owners' esgulty rial, of translating their financial statements is included in C.Z] j current-year earnings. However, for a few afliliates the functional currency is other than the U.S. dollar, and the Preferred stock up to 2,000,000 shares ($ 1.00 par value) effects of financial statement translation are included s; a is authorized, but no such shares have been issued. Com-reduction in other capital. Amounts for 1985 include che mon stock (par value $ l.25) shares authorized total cumulative effect (a reduction of $44 million) at January 1, 550,0 m,WO. 1985, for a change in the functional currency of a Neth-shares of comumen stock erlands afliliate from the U.S. dollar to the Dutch guilder.
December 31 (in thousands) 1985 1984 1983 IssuedJanuary 1 Adjustment for pooling ofinterests 462,928 462,928 462,928 35 1 - - n[Otlggy U stock-relgted ln{ernietien Issued December 31 463,282 462,928 462,928 g jO in treasury (7306) (8.052) (8.297) Outstanding 455,9~6 454.876 454.631 Stock option plans, appreciation rights and performance units are descrilxd in the Company's current Proxy State-sher-ners' mivity ment. Requirements for steck option shares may be met (in millions) 1985 tus t 1983 within certain restrictions either from unissued or treasury Comumen stock issued shares. During 1985, options were granted to 902 cm-BalanceJanuary I and December 31 $ 579 $ 579 $ 579 ployees. As of December 31,1985, approximately 529 Other capitel individuals were eligible to receive options and 1,258 per-BalanceJanuary 1 $ 610 $ 657 $ 676 sons held options exercisable then or in the future. Fureign currency translation ad;ustments (18) 00) (16) stock optionInforsnation Unrealized gains (losses) on securities Average per share held by insurance affiliates 15 (5) - Shares subject Option Market Gain (loss)on treasury stock (Shares in thousands) to option price price dispositions 4 (2) 0) Balance atJanuary 1,1985 9,131 $37.08 $56.63 Balance Dnember 31 $ 611 $ 610 $ 657 Options grantcd 1,805 65.70 65.70 Retoined earnings Options exercised 0 ,176) 31.06 62.58 BalanceJanuary I $11,667 $10,317 $ 9,145 Options surrendered on exercise Net earnings 2,336 2,280 2,024 of appreciation rights (439) 31.25 61.27 Dividends detlaral 0,020) (930) (852) Options terminated (112) 53.30 - Adjustment for pooling ofinterests 11 - - Balance at December 31,1985 9.179 49.31 72.75 Balance December 31 $12.994 $11.667 $ 10.317 Ceaunen stock held in treesvry Outstanding options and rights expire, and the award pe-BalanceJanuary 1 5 313 $ 283 $ 202 riod for outstanding performance units ends, on various Purc hases 283 281 319 dates fromJanuary 1,1986, to December 20,1995. The Dispositions: number of shares available for granting additional options Emploge savings plans O13) 033) 0 01) ' at the end of 1985 was 12,111,642 (13,796,147 at the Stock options and appreciation ed of 1984). equimnrnts for shams of sto k for incentive compen-Em ) stock ownership plan 13) 3) 2) , sation plans as described m the Company's Proxy State-Dividend Reinvestment and Share Punha;c Plan (29) (26) (15) ment may be met within certain restrictions either from Exchange for G E long-term debt - (20) 08) unissued shares or from shares in trea3ury. Conversion of GECX:C long-term As of December 31,1985, approximately 4,297 indi-debt (25) U 1) 09) viduals were eligible to receive allotments under incentive Contribution to GE Pension compensation plan rules. Allotments were made for serv-Tmst (22) - ices rendered during 1985 to 3,624 employees. Business acquisitions - (8) (2) Incentive ownpensation plans 10 20 0) gs , Balance Decemb r 31 $ 310 $ 313 $ 283 C iL + 1
. Conaw Itnients and contingent liabilities In December 1985, GE issued 354 thousand new shares of AUb" stock having a value of $24 million for an acquisit.on Commitments, other than those related to the proposed accounted f< r as a pooling ofinterests. Because th4 acquisi- acquisition of RCA (see note 2), and contingent liabilities, tion was insignificant to GE's operations and financial con- consisting of guarantees, pending litigation, taxes and dition, prior years have not been restated. other claims, in the opinion of the management, are not Busines , activities of most foreign affiliates ar- mainly considered to be material in relation to tiie Company's based on tiie U.S. dollar, and the efTect, which is not mate- financial position.
16
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,eIndosery segatent details s- ,,w m
Revenues and net earnings by industry segment for each of Segments on page 34 of this Report. Additional detail is the last five >vars are included in the Summary ofIndustry shown in the tables below. Externel sales and etteer latorsegmeone sales C;_ _^' _., profit incense (in millions) Nr the )rars ended December 31 Nr the years ended December 3 i Nr the pars ended Dttember 31 1985 1981 1981 1985 1981 1981 1985 1931 1984 Consumer pnxlucts $ 3.452 $ 3,732 $ 3,650 $ 117 $ 126 $ 91 $ 392 $ 407 $ 310 hlajor appliances 3,617 3,650 3,078 - - - 467 462 383 Industrial 1,001 3,9 35 3,880 567 339 348 327 201 190 Pbwer systems 5.373 5,797 5,686 179 213 192 792 789 709 Aircraft engines 4,625 3,731 3,435 87 101 60 676 510 403 hlarcnals 2,3 17 2,117 1,'X>l 112 121 96 466 470 329 Technical pnx!ucts and services 4,991 4,578 3,759 203 225 61 525 495 385 Finamial services 499 4 18 397 420 355 306 Nxural resources - 6&2 1,579 - - - - 192 479 Total segment operating pnsit - - - - - - 4,065 3,881 3,191 Interest and 6nanc ut charges - - - (360) (333) (370) Unusual items - - (22) (145) (30) Corporate items and eliminations 16 1 H9 25) (1,265) (1,141) (851) (113) (17) (61) Total $29,272 $28,9 46 $27,681 $ - $ - $ - $ L510 $ 3, M6 $ 1,0 H in general, it is GE policy to price internal sales as nearly to agencies of the U.S. government, the Company's largest as practical to equivalent commercial selling prices. single customer. Most of these sales were aerospace and Slightly more than one-fifth ofexternal sales in 1985 were aircraft engine products' and services. Assets m. _, _ _ .y, plant med eegulpmeent (In millions) At December 31 Nr the years ended December 31 Depreciation, depletion Additions and amortization 1985 1984 1983 1985 1981 1983 1985 1981 1983 Consurner rnxlucts $ 2,287 $ 2,340 $ 2,273 $ 179 $ 269 $ 222 $ 129 3 til $ 119 Alajor appliantes 1,401 1,170 1,030 146 111 80 78 75 68 Industnal 2.652 2,670 2,569 201 261 228 163 151 158 Power systems .3,451 3,689 3,2 12 116 2 13 252 166 179 173 Aircraft engines 3,950 3,317 2,523 333 356 218 161 136 12(2 hlarerials 3,876 3,091 2,605 619 772 342 211 207 203 Technical products and services 2,777 2,778 2,052 289 340 216 230 166 124 Financial services 2,748 2,312 1,929 - - - - - - Naturai resources - 256 2,007 14 61 11 67 Corporate items and ehminations (287 2,908 ( 058 92 119 99 49 34 43 Leal $26,4 42 $21,7 30 $21,288 $ 2,038 $2.488 $1,721 $1,226 $1,100 $1.084 o Net earnings for industry segments on page 34 include Minority interest is allocated to operating components allocation of corporate financing income and expense to responsible for investments in consolidated affiliates. parent Company components based on change in individ- Minor adjustments were made to industry segment clas-ual component average non-fixed investment. Affiliated sifications in 1985. Ceramics operations, formerly in-companies servicing their own debt record interest and cluded as part of the consumer products segment, are now financial charges directly. classified with materials. Ladd Petroleum Corporation, General corporate expenses are allocated principally on formerly part of natural resources, is also classified with the basis ofcost ofoperations, with exceptions which rec- materials. Australian coal interests that remained after the ognize the varying degrees to which certain alliliated com- sale of most of Utah Internauonal in 1984 were disposed panies maintain their own corporate structures. ofin 1985 (see note 7) and their nominal operating results Provision for income taxes is allocated on the basis of for 1985 are included in corporate items. Operating re-total corporate effective tax rate, except for financial serv- suits for prior years have not been restated for these ices, natural resources and unusual transactions, whose changes because of their immaterial effect. However, in income taxes are calculated separately. order to present more comparable data, total assets and 47
f property, plant and equipment information for 1984 and controls but also include larger sizes of motors for a broad 1983 have been revised to include ceramics and Ladd range ofindustrial users. Motor products are used within Petroleum Corporation in the materials segment rather GE and are also sold externally. Electrical construction than in the segments to which they formerly were equipment focuses on electrical distribution and circuit assigned, protection equipment needed for installation in commer-A summary description of each of the industry seg- cial, industrial and residential buildings. General Electric ments for 1985 follows. Supply Company Division operates a nationwide network of electrical supply houses. Transportation systems include o Consenior products consists oflighting products'
, diesel-electric and electric locomotives, transit propulsion video and audio pnxiucts, batteries, mobile communica- equipment, motorized wheels for off-highway vehicles, tions equipment and KCNC-TV (Denver). Lightmg prod- such as those used in mining operations, and drilling ucts mclude a wide variety oflamps: incandescent, fluores- drives. Locomotives are sold principally to domestic and cent, photo, miniature, high-intensity and specialty. foreign railroads, while marDts for other products include Markets and customers are extremely varied, rangmg from state and urban transit authorities and industrial users.
household users served through retail outlets to original equipment manufacturers, such as the automotive indus- e Power systones serves worldwide utility, industrial try. Video and audio products include television receivers, and governmental customers with products for the genera-videocassette recorders, radios, tape recorders, citizens tion, transmission and distribution of electricity, indus-band radios and household telephone products, all of trial drives, and related construction, installation, engi-which are distributed principally to retail outlets. Batter- neering and repair services. Steam turbine-generators are ies are principally the nickel-cadmium and sealed-lead sold to the electric utility industry, to the U.S. Navy and, rechargeable type sold to manufacturers and through con- for cogeneration, to private industrial customers. Marine sumer retail channels. Mobile communications products steam turbines and propulsion gears are also sold to the consist mainly ofland-based FM two-way and one-way U.S. Navy. Gas turbines are used principally as packaged radio equipment and cellular telephones for a variety of power plants for electric utilities and for industrial cogen-customers. This segment also included broadcasting, eration and mechanical drive applications. Centrifugal cablevision and household appliance operations through compressors are sold for application in gas reinjection, the dates of their dispositions (see note 7). pipeline service and such process applications as refineries and amm nia plants. Nuclear operations have become in-o Maior appliances includes both General Electric cre smgly oriented toward plant support services and fuel and Hotpoint brands of kitchen and laundry equipment, ssembhes with considerably less effort devoted to boiling-such as refrigerators, ranges, microwave ovens, freezers, dishwashers, clothes washers and dryers, and room air con- watu-type p we reacmrs, inasmup as dm haw been no new nuclear plant rders m the Umted States since the ditioners. A major portion of major appliance sales is to a mid-1970s and activity in international markets remains variety of retail outlets. The other principal marku con-m dest. Power dehvery products mclude transformers, re-sists of residential building contractors who install major lays, electnc h)ad management systems, power conversion appliances in new dwellings. , systems and meters, principally for electric utilities. Con-o Industrialincludes factory automation products, - struction and engineering services include management semiconductors, motors, electrical equipment for indus- and technical expertise for large projects, such as transmis-trial and commercial construction, General Electric Supply sion lines; maintenance, inspection, repair and rebuilding Company Division and transportation systems. Customers of electrical apparatus produced by GE and others; on-site for industrial systems generally include industrial distrib- engineering and upgrading of already installed products utors, original equipment manufacturers and industrial sold by GE and others; and environmental systems for end users. Factory automation products cover a broad utilities. range of electrical and electronic pnxlucts, including drive systems, with increasing emphasis on factory and ad-vanced engineering automation applications. Semiconduc-tor operations provide the latest in semiconductor technol-ogies to other GE operations as well as to external customers. An affiliate (Intersil) is a supplier of advanced integrated circuits and data acquisition products to the merchant market as well as a source ofintegrated circuits for GE's diversified pnxluct lines. Motors and motor-related pnxlucts consist mainly of appliance motors and 4s
o Aircraft engines and replacement parts are manu- o Financial services includes a nonconsolidated aflil-factured and sold by GE for use in military and commer- iate, General Electric Financial Services, Inc. (GEFS), and cial aircraft, and also in naval ships and as industrial power its two wholly owned afliliates, General Electric Credit sources. General Electric's military engines are used in a Corporation (GECC) and Employers Reinsurance Corpora-wide variety of aircraft that includes fighters, bombers, tion (ERC). See note 14 for more information about these ! transports and helicopters. CF6 engines are used in the entities. GECC primarily engages directly or through affil- ! AtcDonnell Douglas DC-10, the Airbus Industrie A300 iates in distribution sales financing, commercial and indus . i and the Boeing 747. Afore advanced CF6 engine models trial financing and real estate financing. Strong emphasis j have been selected to power the Boeing 767 and the on leasing has been a major factor in GECC's growth in Airbus Industrie A310 and A300-600. Ofgrowing im- { recent years. ERC is a major participant in the pmperty/ portance is 'the CFA156 engine family produced by the casualty reinsurance business in the United States. Other joint company of General Electric and SNECAIA of financial services activities include two consolidatal aflili-France. Applications include the Boeing 737-300, the re- ates: General Electric Venture Capital Corporation pro-engined AtcDonnell Douglas DC-8 Super 70s and the re- vides venture capital, primarily to new or existing high-engined Boeing KC-135 military tanker. An advanced en- technology companies; and General Electric Real Estate gine model is usal for the Airbus Industrie A320. GE also Crnlic Corporation is an equity investor in selected real produces jet engines for executive aircraft and regional estate development projects. commuter airlines.
- Natural resources through the first quarter of 1984 o Materials includes high-performance engineeral consisted of Utah International Inc. See note 7 for infi>r-plastics, silicones, industrial cutting materials, laminates mation pertaining to dispositions of this afliliate and ear-and ceramics which are sold to a diverse customer base lier discussion in this note about 1985 industry segment (mainly manufacturers)in the United States and abroad. adjustments.
Alaterials also includes I;tdd Petroleum Corporation, an oil and natural gas developer and supplier with operations mainly in the United States. e Technical products and services consists of tech-nology operations providing products, systems and serv-ices to a variety of customers. Aerospace products span space sciences, electronics and microelectronics, ordnance systems, avionics, computer software, and simulation and control systems. Afost aerospace sales are to the U.S. gov-ernment. Aledical systems include the new magnetic reso-nance ( AIR) scanner, computed tomography (CT) scanners, X-ray, nuclear medicine, ultrasound, and other diagnostic equipment and supporting services sold to domestic and fi> reign hospitals and medical fitcilities. Infi>rmation serv-ices are provi&si both to internal and external customers by General Electric Information Services Company. These in-clude enhanced computer-based communications services, such as data network services, electronic mail, electronic data interchange and automated clearinghouse services, which are offeral to commercial and industrial customers through a worldwide network. Other infi>rmation services include application software packages, and contract sys-tems design and programming services. Calma Company designs, manufactures and sells interactive graphics sys-tems fi>r computer-aided design and manuEicturing. i l l 49
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u.. ma .s aa Revenees (in millions) Er the 3rars ended December 31 Total revenues intersegment sales External sales and other income 1985 1981 1983 1985 1981 1983 1985 1931 1"83 United States $26,831 $25,968 $23,513 $ 671 $ 680 $ 590 $26,160 $25,288 $22,923 Far East including Australia - 1,017 1,603 - 4 10 430 - 577 1,173 Other areas of the world 3,650 3,330 3,826 538 259 211 3,112 3,071 3,585 Intracompany eliminations (1,209) (1,379) (1,261) (1,209) (1,379) (1,261) - - - Total $29,272 $28,936 $27,681 $ - $ - $ - $29,272 $28,936 $27,681 Netearnings Assets Nr the 3rars ended December 31 At December 31 1985 1981 1983 1985 1984 1983 United States $2,229 $2,061 $1,667 $22,733 $20,880 $ 18,105 Far East including Australia - 150 278 - 681 1,158 Other areas of the world 101 59 80 3,809 3,290 3,861 Intracompany eliminations 6 10 (1) (110) (121) (139)
'Ibral $2,3 % $2.280 $2,024 $26,432 $21,730 $23,288 Geographic segment information (including allocation of spectively. On a comparable basis, the amounts were income taxes and minority interest in earnings of consoli- $2,271 million, S 118 million and S 1,582 million, re-dated affiliates) is based on the location of the operation spectively, at December 31,1984; and $2,818 million, furnishing goods or services, U.S. revenues include exports S 168 million and $2,336 million, respectively, at Decem-to external customers, and royalty and licensing income ber 31,1983.
from foreign sources, Commencing in 1985, data for Far East including Australia have been combined with other Es. experts to externehesteiners
'I" " "'I areas of the world. In prior years, operations of Utah 1985 1984 1985 international, GE's former affiliate, had been the most significant contributor to Far East including Ausualia, Europe $1,215 $ 950 $ 1,191 Pacific basin 965 1,125 1,(115 Revenues, net earnings and assets associated with foreign operations are shown in the tables above. At Annicas 502 603 618 Afiddle East and Africa 533 437 619 December 31,1985, foreign operation liabilities, minor- 136 Other areas 131 140 icy interest in equity and GE interest in equity were $3,349 $3,2n $3,639 Total $2,190 million, S116 million and S 1,503 million, re-1
a EHest of changing prices (oneudited) dlit$ In the " adjusted for" column in the table at right, restate- g ,, ,, 4 ments are made to cost ofgoods sold for the current cost of Fur the ) ear ended Ikcember 31,1985 replacing inventories and depreciation for the current cost As AdNsed for of plant and equipment. GE's 1979 and 1980 Annual (in millions) reported current costs (a) Reports included technical information about methodol-Sales of products and services to ogy used in preparing these data and may be obtamed customers $28,285 $28,285 from Corporate Investor Communications at the address Cost ofgoods sold 19,775 19,907 on page 59. Selling, general and Restatements of cost ofgoods sold are relatively small administrative expense 4,349 4,349 because of GE's extensive use of LIFO inventory account- Depreciation, depletion and ing and the relatively low rate ofinflation in 1985. How- amortization 1,226 1,476 ever, restatements of depreciation expense to current levels Operating costs 25,350 25,732 are relatively large, reflecting the cumulative etTect of price Operating margin 2,935 2,553 increases over a number of years since the assets were Other income 987 987 acquired. Interest and other financial Trends in these adjusted data over time, excluding unu- charges 060) 060) sual items, may be at least as useful in understanding Eamings before unusualitems 3,562 3,180 inflation's impact as are the data for a single year. The table Unusual imnu (22) (22) below presents selected data adjusted for inflation for the Eamings befom inconw taxes 3,540 3,158 past five pars. Provision for income taxes (1,192) (1,192) Minority interest (12) (9) Net earnings $ 2,336 $ !,957 Earnings per share (in dollars) $ 5.13 $ 4.30 Share owners' equity at December 31 $ 13,9M $ 16,855 (a) In dollars of average 1985 purchasing power. Selected financial date ediasted for the effect of cheoging prices in deHers of everage 1985,_ " *
-, power (Dollar amounts in millions; per-share amounts in dollars) 1985 1984 1983 1982 1981
- Sales of products and services to customers $28,285 $28,945 $28,947 $29,542 $32,221 Current cost information Net earnings before unusual items (a) 1,957 1,964 1,666 1,314 1,377 Net earnings per share before unusual items (a) 4.30 4.33 3.67 2.90 3.02 Share owners' equity ac December 31 16,855 16,337 16,616 16,597 16,664 Excess of increase in general price level over increases in specific GE price levels (b) 377 567 614 605 832 Other Purchasing power loss on net monetary items 104 116 87 54 99 Dividends per share 2.23 2.12 2.03 1.86 1.85 Market price per share at December 31 72 58 62 53 32 Average Consumer Price Index (CPI-U; 1967 = 100) 322.2 311.1 298.4 289.I 272.4 (a) Unusual items affected current cost earnings in 19M only. Net camings and net earnings rer share including unusual items in 1984 were $ 1,325 million and
$2.92, rescu tively. (b) At December 31,1985, in end-of->rar dollars, the current cost ofinventory was $5,812 million and of property, plant and equiprnent was $9,702 million. In dollars of average 1985 purchasing power, the increase that might have been expected from general inflation was more than the increase in spa-itic GE current costs by the amount shown. A similar pattern is shown in the other 3rars.
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.~ _ w.- a a.- --.w w a.a - . -wa. _m..- u au-- w~ - -- a - General Electric's Board of Directors, pictured alphabeti-cally on the preceding pages, conducted 11 meetings in Comsseittees of flee Board 1985. wce m-nc m At the November meeting, the Board increased the Richard T. Baker, lienry L liillman, quarterly dividend from 55 cents to 58 cents per share. Chirman Chairman In addition to regular meetings, Directors participated y,'n]' $'g^'i,',n ' If*[,^;,B*id' n Y on the following committees that aid the Board in its Barbara Scott Preiskel James G. Boswell !! duties. Irw is T. Preston sdas s. Cathcan The Audit Committa, which met five times, reviewed yi c u.see fj,".,E h p, et ,t the activities and independence of the Company's inde- James G. Boswell !!' Andrew C. sigter pndent public accountants and the activities of GE's in- y jQ$h,Jr., Polelle R _ _ _ temal audit staff. It also reviewed the Company's internal vice Chirman c ine. fmancial controls and compliance with key Company poli- Charles D. Dickey,Jr. lienry 11. Ilenley,Jr., Chai cies, including those related to the defense procurement Ii*yYyg;li f*"I'Y'l'- g p area. This committee includes only Directors from outside Frank II.T. Rhodes Vice CNirman the Company. Walter B. Wriston Richard T. Baker The Finana Committee examined the Company's fman- an e y'*,y*j;[m'"",k" cial position, its pension funding and trust operations, its Devel.p ems Genrude G. Michelson foreign investments, the operations of General Electric j Barbara Scott Preiskel Andrew c sigla Financial Services, Inc., and other matters involving large- walter B. wriston,
- ,cale utilization of Company funds. It met four times. Cwirman mim.s.sy d si s. th an ec Tbe Afanagement Detdopment andCompensation Committee ,y , y, ],,
met 10 times. It reviewed the Company's exempt salary tienry L lidlman Chairman structure and executive compensation programs and ap- Genrude G. Michelson Edward E. Hood,Jr., proved changes in GE's management. u es. ,c unnet Charles D. Dickey,Jr., y j'o Chainnan The Nominating Committee held three meetings at which Charles D. Dickey,Jr. Chainnan lienry L 11illman it reviewed candidates for the Board and recommended the 8 " ' Roben E. Mercer committee structure and membership for the following !$ry~iI' ion'iey,Jr.
}rar. Gertrude G. Michebon The Opvations Committa held five meetings, including i5 T Pr t y*3,, C ,
joint meetings with the Audit, Finance and Technology and Science committees. Among its activities were reviews of the aerospace business and the factory automation business. The Public Responsibilities Committee, at its two meetings, reviewed the activities of the General Electric Foundations and evaluated public issues that could have a major impact on the Company. The lidmology andScience Committa held two meetings, Emh joint sessions with the Operations Committee. Its review of the major appliance business included an inspec-tion of new manufacturing technologies in operation in Kentucky and Tennessee. 54
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Corporate Executive OHicers 3 John F. Welch, Jr. Lawrence A. Bessidy Edward E. Heed, Jr. Pawl W. Von Orden Chairmawf the Ikurd and Vice Chairman of the Ikurd and Vice Chairman of the 1%urd and Corporar: Exautive Offwe - Chief Executive Offwer Executive Offwer Executive Othcer Executive Vice President - David C. Genever.Wetling i ~~ 1 Corporate Executive Offre Charles V. Sheehen Corporate Executive Othce . . ' .. ^ y h Yke PresiJent Yke President fj; 'f ;
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n; _ Dennis D.Deaunerneen Freak P. Doyle Jack O. Pelffer Senior Vice President-Finance Senior Vice President Senior Vice President Corporate Finance Staff Corporate Relations Start Executive Management Staff
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- 2. . ( . ;,.y t Weiter A. Sdeletterbeck Roland W. Sdensitt Senior Vke President- Senior Vke President General Giunsel and Sox retary Corgurate Reseanh and Corp > rate legal Scalf Development Corporate steH OHicers Mlchael A. Carpenter Fred W. Gerry Arthwe V. Puccini VP- G>rp>ra:e Buuness R. Howard Annin, Jr. '~
VP-Giriur are Enginot nng VP-Corpirare Emploge Deselopment arx! Plar ning VP-Western Regional Relations and Manufattunng Relations y j, ,, Thennes R. Casey, M.D. Joseple Hendres Edwurd J. Skike VP & G>mpany Muf w.al Diret tor VP-Northeastern Regional VP & Depury General Giunsel VP-Corp > rate Informanon Relations Jonees J. CosteIIe Joyce Hergenlien F5" VP & Gimptroller Willione C. Lester VP-Girp> rate Public Relations W. Roger Strolew VP-East Central Regional Dele F. Frey Stendley H. Hecle #P ### '""'"'" '""' Chairman of the lh urd VP& Treasurer "'F"' and President Iver J. Petersen Phillips S. Peter *** * " "'"E"" # E""' General i let rra Inmtment \ P-G>rgurare Markerme g ,; VP-G>riurate Gmernment ' Relanons 55
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Weg Managemeent (As of February 14, 1986) _. , , _ __, _, ., Aerospace Aircraft Engine Andean Countries , Rodger E. FerroN JebeD. Opie
. . - V P & General Manager VP & General Manager
' i NgJ Andean Countries Division Construction Equipnrnt )
0;rratums M T. David M. Engelanen VP & General Manager Ginstructu>n Equipment Sales p Colmes Conipany Dmsion [' DanielW. AmeOlewglelin Lewis V.Dennesetti Brien H. Rowe President Senior VP & Group Executive Senior VP & Group Ewrutive Calma Company Aerosiwe Group Aircraft Engine Group Censunter Electronics NisbelesBeemski WIIIIens J. Crawford III VP & Gerrral Manager VP-Government Relations Jessives A. Robinsen Ordnance Systems Division and Spual Business Pronxts g VP & G:neral Manager tusseE L. Nell, Jr. Gununn Elutnas Operations Robert D. Desrecl***2 Latin Anserican GE VP & General Manager VP-Finarne Avionic and Eintronic WIIIIene R. C. Blendell Robert C. Hawkins Systems Divisx>n w g aum Chairman of the Board and Asen J. Rosenberg Lynn Aircraft Engine Pntlutt Chief Exnutive Otticer . Corporate Ming VP & General Manager 0;rrations Canadian General Electric g p,,,gg,,, Spne Systems Division Freak E. Pi koring Ladisless W. Worseche VP & General Manager Robert T. E. Gillespie VP & General Manager Lynn Pnaluttion Division Exetutive Vke President Defense Systems Division Harry C. Stenecipiner J#r9en F. NIHke VP & General Manager Chairman of the Board and ,) y '- Esendale Aircraft Engine Chief Executive Officer Pnxlutt Operations Gerrral Electric do Brasil S. A. Edward C. Severle Paul H. Way l VP & General Manager Chairman of the Board and Airline Marketing Division Chief Executive Otfner General Electric de Mexico, S. A. Lee Koper de C.V. Jennes R. Birie VP & General Manager Senior Vice President Commercial Engine Pn>jects Corp > rate Tradmg 0;rrations Dmson Joba W. Perdive W. George Kroll VP & General Manager VP & General Manager Geirral Electric Supply 1 Esendale Pntluttion Division c,mpany Division I Francis J. Schilling Rewee O. Roberts VP-Tec hnical Support VP-Corporate Sourting
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Robert J. Snowlead VP & General Manager Marine and Industrial Engiers and Service Division George H. Word VP A Gerrral Manager Mihtary Engine Proysts Division
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t Laild . Petroleum y John H. Moore ' Charles R. Corson Robert C. Wright Presalent Reger W. $<hipke Senior VP A Group laetutne PresiJt nt ark! Luk! Petroleum Corp ration Semor VP & Gn>up Exet utise i ngnxtred Ntateriah Group thief Exeuirne Ottner Ntator Apphan(e Group c - >u ~ , r - >~n t' T,.. m es H. ,its ,. , eld Ri. ru. ..r e rx i ts ) sinn I '"' la p lian P tion Leo A.Helloren LlgMing Dn ision knior VP linante
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Gary C. Wendt VP & General Nianager g Exeturne Vac President , Ntap>r Apphante Ntarketing Fectory Autoniation Gl( L I inanung Ortrations ( Dn ision Miche el S. Blum Stephen J. O'Brien Marion 5. Richardson Nsuor \ P A Guxral 51anager VP A General Nianager VP A Guxral NLaaetr G1( L Real 1 state Iinanual ' Ntaior A;T ante h Sales arul lat tory Automation Prmfut ts N'nxes Dn nion Sen ne Dnision D" "'"" Den L. Hele John C.Truscott Robert P. Collins Senior VP A Gux-ral Atanagtr VP A General Nianager VP 6 Gux ral Ntanacer GILL Lomnx rual I inanung Niaior Appliante hhnology Automation Lontrols On ratu ns Dn nion Ralph D. Ketchum U" "'"" Joel Tenzer Bernard P. Lon5 M""r VP A Group i xecutne VP A Gun ral Ntanager N nior VP A Gern ral Ntanagtr laghting Group Drn e >> stems On ranons til( L Dntribution 5a!" Iinanung Dnision Eugene F. Apple m VP G ral Ntanam i James H. Oxenne lamp Comiurn nts and L hnn al MedIcel Systems knior VP A Gux-ral .\lanager Pn(lutts Daision ( .1 ( L 'Irar7s;urratiori arui ' Industr al i manung Dn nion hgLhpn
- VP G uxtal E na m '<
Michael R. Debney tamp Pn=lutts Dnluon VP A Gun ral Ntanager G1 (L Loriurate I inanual Thomas L. Williams VP GunalNbnner h f f N n nes Dn nion g 3 p; Michael G. Fitt Dn nion Pn suk nt arxl ( hiet I su urne ()ttiu r 1 mployen Reinsurarac l
,l 1 Lor;uranon Walter L. Robb Semor VP A Grnup Exeturne N!cdnal Systems Gn up Robert L. Stocking General Electric VP A Gux ral Ntanager Information Services Nf'd"at systems Sales and Sen ne Dn nion Walter W. Williams President Gurral I la tra Informanon N n a e s ( nmpany l
57
Operating M:necesucnt, n a y Mtbile Plastics Power Systems e,,,,,,,,,,,,, Jeha M. Treni i Neil L. Felmus VP A Geru ral hianager VP A General Stanager _ v_ Nutlear Energy 0;rrations Atobile Communications Division ;
; Henry E. Stone
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VP & Gerrral Stanager I'# Nutlear Tu hnologies aml Fuel Dn ision Oyde D. Keeton NFS) . ;.7
. <% g Glen H. Niner Senior VP & Group Exetutive John A.Uragebert Senior Vke President V P & Gmul 51 anger Donrstic Apparatus and Plastas Group P mer Systems Busirxss Engineering Scrutes Division
.g i Paul L. Dawson Eugene J. Keverik yj Chairman of the Iturd and VP & Gerral Stanagtr 7 Chief Lxeturne Othter gm.er Wlivery Dnision Gerrral llettrk Plastns B V.
- J.Richced Stonesifer Philip M. Gross -', VP & Gem ul Stanager VP & General 5 tanager , Internatinnal Constrtation arx!
Van W. Williams Plastics Ventures Diusion - Engintering Sen nes Dnision l Senior \}P & Group Executive Herbert G. Rammreth 1 Giorgie Orsi Stotor Group \,P & General 5 tanager Ntanacing Dirutor Esger D. Morey Plastas Sales Dn nion SADIUSADI LAtl Construttion VP & Gerrral 5 tanager George B. Cox 0;rrations L. Deneld Simpson Senior N P & Group Exeturne Etor Atarketing Dnision VP & Gerrral Stanager
. Turbirr Group Frank D. Kittredge Plastas Stanufacturing Dnision VP & General 5 tanager Michool D. Lockhart
uwe 5. Wasche' VP-Turbine Finante and
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VP & Gerrral 51anacer Busurss Sup;mrt Henry J. Singer Plastus 5farketing Dmsion VP & Gerral hianager
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- Joseph G.Wirth
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( , g '"*[ Turbine Starketing and Proints Utihty and Industrial Sales Dnision Plastics Tuhnology Divnion Division Delbert L.Williamsen VP & General hianager g,,gg,,g,cg,, North Anrrita hlarketing 0;rrations James E. Dykes VP & General Stanager Semiconduttor Daision Transportation Systems Carl J. Schlemmer VP & Gerrral Stanagt r Transportarion Systems Operations John C. Dwyer VP & General Stanagt r Transportation Ntarketing aral Sales Division W
Shsro Owner cad Othar Informatico Overterlyinferneation able, without charge, on or about April 15 from: Corpo-e rate Investor Communications, General Electric Company, Fairfield, Conn. 06431. (Douar amounts in millions; First Second - 'Ihird Iburth per-slure amounts m dollars) quarter quarter quarter quarter i of the General Electric Pension Plan, the Sum-cop cs mary Annual Report for GE employee benefit plans sub-f Sales of pnducts and ject to the Employee Retirement Income Security Act of services to customers $6.196 $6,813 $6,i20 $8,726 1974 and other GE employee benefit plan documents and Operating margin 599 797 710 829 information are available by writing to Corporate investor
, Net earnings 511 590 575 660 Communications and specifying the information desired.
Net earnings per share 1.12 1.30 1.26 1A5 The Annual Reports of the General Electric Ibunda-ws4: tions also are available on request. Sales of pnducts and j services to customers $6,583 $6,661 $6,723 $7,977 Trosesfer Agent Registrer
/ Operating margin 607 698 691 819 General Electric Company Morgan Guaranty Trust Net earnings 485 579 561 652 Securities Transfer Operation Company of New York Net earnings per share 1.07 1.28 1.24 IA4 FDR Station Stock Transfer Department mig. 4, ma ,,,a., P.O. Box 5339 30 West Broadway Dividends G>mmon stock declared market price range Ansivel Meeting 1983 19s t 1983 19m The 1986 Annual Meeting of the General Electric First quarter 55c 50c $65 %-55% $59 48% Company will be held on Wednesday, April 23, at the Second quarter 55 50 62 %-58 56w-50 % Vista International Hotel in Kansas City, Mo.
Third quarter 55 50 61 %-56 % 59w48% Dessnestic enspieyntent Iburth quarter 58 55 73 %-56 % 58 %-53 = While the total number of GE managers and professionals The New York Stock Exchange is the principal market on showed a decline for the year ended September 30,1985, which GE common stock is traded. As of December 6, the percentage of minorities and women in these key job 1985, there were about 490,000 share owners of record. categories stayed about the same or increased. This reflects a sound balance between GE's continuing commitment to Dividend Reinvestaient Plan Equal Employment Opportunity and actions taken to Share owners who have one or more shares of GE stock tighten staffing levels and organizations. registered in their own name(s) are eligible to participate The percentage of women among GE managers rose in the GE L)ividend Reinvestment and Share Purchase from 5.7% in 1984 to 6.3%, as their number went from Plan. Ihr an authorization form and prospectus, write 1,408 to 1,479. Women again accounted for 13.4% of to: Share Owner Services, General Electric Company, GE's professional work force, although the number of P.O. Box 206, Schenectady, N.Y.12301. women professionals went from 7,296 to 7,182. The per-Ferne10-K and otherinfersnation centage of minority managers edged up from 4.8% to The financial information in this Report, in the opinion of 4.97c, although their number went from 1,183 to 1,165. management, substantially conforms with or exceeds the During the same period, the percentage of minority information required in the "10-K Report" to be submit- professionals slipped to 7.4% from 7.5%, as their number ted to the Securities and Exchange Commission at the end went from 4,083 to 3,952. of March. Cenain supplemental information is in that re_ More than 10,400 women and 4,300 minorities were port, however, and copies without exhibits will be avail. promoted. Overall, minorities account for 11% and ~ women 25.6% of GE employees. O 1986 General Eleuric Gimpany Printed in U.S. A. Note: Unless otherwise indicated by the context, the terms "GE,"
" Genera! Electric ~ and " Company" are used on the lusis of consolida-tion described on page 38.
sinsaat g attcmc. $ and GE are registertd trackmarks of General Electric Company;
- and
- indicate registered and unregis-tered trade and service marks ofGeneral Electric Company and its aff:liates.
59
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l ( ,; G E N E R A L ( N. E LE CTRIg Bulk Rate U.s. brage 190 Annual Report !$ AID General Electric Compiny General Electric Company Fairfield, Conrnticut (i>131 i
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0 4. GENERAL $ ELECTRIC NUCLEAR ENERGY BUSINESS OPERATIONS t GENERAL ELECTRIC COMPANY
- VALLECTOS NUCLEAR CENTER e PLEASANTON, CAllFORNIA 94566 I
March 21, 1986 Dr. H. R. Denton, Director Division of Operating Reactors Office of Nuclear Reactor Regulation , U.S. Nuclear Regulatory Commission i Washington, D.C. 20555 ) l
References:
- 1) Docket 50-18
- 2) Docket 50-70
- 3) Docket 50-73
- 4) Docket 50-183
Dear Dr. Denton:
As is customary, copies of.the General Electric Annual Report are forwarded to the Commission in order to provide updated General Electric corporate and financial information. Accordingly, copies of the 1985 Annual. Report are enclosed for the referenced dockets. 1 Sincerely, Yb - J G. E. Cunningham Senior Licensing Engineer (415) 862-4330
/ca Enclosures l /oo k q
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