ML20246P240

GE 1988 Annual Rept

ML20246P240
Person / Time
Site:	07000754
Issue date:	12/31/1988
From:	Bossidy L, Cunningham G, Welch J GENERAL ELECTRIC CO.
To:	Cunningham R NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
References
25328, NUDOCS 8903280165
Download: ML20246P240 (76)

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&rwral Elet tr it Company and < onv>lidated alhliates (Dollar arnounts in ruillions; per-share announts in dollars) 1988 1987 1986 Revenues

$50,089

$48,158

$42,013 Net earnings 3,386 2,915 2,492 Dividends declared 1,314 1,209 1,081 Earned on average share owners' equity 19.4 %

18.5%

17.3 %

Pershare Net earnings S 3.75

$ 3.20

$ 2.73 Divideix!s declared 1.46 1.32 W l.18 See note I to ihe consolidated financial statements about the change in consolidation policy in 1988.

Contents Letterto Share Owners 1

Worldwide Business Profile 5

Board of Directors 18 Management 20 FinancialSection 23 Corporatelnformation 71

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}

To Our Share Owners i

l.

eteen eighty-eight was another exciting and suc.

1988, we began hearing: GE is "too difTicult to under-cessful year for GE. Earnings per share grew 17% Earn-stand" arxl "[mrtfolio managing." We even heard ourselves i

ings were $3.386 billion on revenues of $50.089 billion.

described by the "C" word - conglomerate - with its j

The fourth quarter was the first in which GE's re[x>rted net usual pejorative corollary: "Who knows what they'll buy or F

carnings broke the one-billion-dollar mark. Return on sell next?"

equity was 19.4%, up almost a point. Operating margins You get the idea.

grew, as did total cost prmiuctivity, which is now gaining at Perhaps a strategy that appears to us crystal clear and three times the national average and accelerating.

consistent - because we live by it - seems less so to some The year was punctuated by several key acquisitions, of our key constituencies in the media and financial 9

alliances andjoint ventures that strengthened the Compa-

. community.

ny's position around the globe. The results of these and This is more likely a failure of our communication other globalization efforts were apparent as revenues from efforts rather than one of understanding, so we have international operations approached $11 billion, produc-decided to use a good part of this letter io explain again, ing an operating profit of $2 billion - up more than 50%

without adornment, the operative premises and world from the level ofjust two years ago and accounting Ibr view that have guided, without exception, every major more than one-third of GE's total operating profit in 1988.

move we've made since 1981.

He strong demand for our prmlucts around the world There is no denying we are a diverse company. We are helped GE make a $3. I billion positive contribution to the not a computer, or oil, or auto, or steel monolith. Those U.S. balance of trade in 1988,50% greater than in 1987.

who track us in the financial analyst conununity or finan-lly virtually every measurement, it was a great year. Ilut, cial press have much more homework than do those who as is usually the case in most years, a few thorns can be watch and report on our peers. We have businesses rang-

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fbund among the roses-two, to be exact.

ing from plastics to network broadcasting to the manufac-

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The first was a problem we've experienced with a new ture ofja engines to reinsurance. Ilut the strategy, the type of rotary compressor in certain nuxlels of our large management philosophy that drives the Company,is the b

refrigerators. There is no safety issue involved, and we are essence of simplicity, in the midst of an active campaign to replace every one of g

these compressors with minimum inconvenience to our j

customers. Our aim i's to come out of this situation with i

our reputation Ibr customer support and satisfaction not j

only intact but -if anything-enhanced. While the cost j

to the Company will be substantial, we have set up reserves e have two basic premises. The first is that we will j

to cover the estimated cost of the fix-and we still had a nm only businesses that are number one or number two in

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record performance in 1988, their global markets - or, in the case of services, that have j

The second disap[mintment of 1988 is one you, as share a substantial position - and are of scale and potential

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owners, are quite familiar with: the price of our stock.

appropriate to a $50 billion enterprise. Currently, there Those who have held GE shares from the early 1980s have are 14 of these businesses, highly diverse in their pursuits s

j tren rewarded handsomely. Appreciation and yield pro-but closely knit by common values, shared technology and l

vided a return averaging 20% per year, compounded from substantial resources; and they draw upon a [xml of man-f 1981 to 1988, even with the October 1987 correction, com-agement talent we believe is unequaled in the world.

pared with a return of 15% ibr the S&P 500. Itut that's The second premise is that in addition to the strength, j

yesterday's performance. In 1988, the stock appreciation resources and reach of a big company, which we have didn't keep pace with the Gmnpanfs performance.

already built, we are committed to developing the sensitiv-We're not sure why this is the case, but it occurs to us ity, the leanness, the simplicity and the agility of a small that perhaps the pace an i u tiety of our activity appear company. We want the best of both.

unfocused to those who v;cw it from the outside. The gen.

These premises shape and explain everything we do.

eral media and the financial press have, Ibr the most part, in acquisition philosophy, ihr example, being number I

been more than liivorable in their appraisal of our per-one or number two dictates that we will only acquire com-formance, but as we've picked up the tempo, especially in panies that are a direct and enhancing graft onto one of our 14 key businesses or that are large, freestanding and in

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a position ofleadership in their marketplaces. The RCA j

acquisition, while old news, illustrates this principle very l

1

f well. NiiG was a part of RCA and the nationh number one the Roper Corix> ration to strengthen the ;x,sition of GE network. We kept it and added it to our other leadership Appliances in the domestic range market. GE Financial businesses.

Services (GEFS) acquired the credit card business of Alont-f The RCA Aerospace group, on the other hand,was a gomery Ward, a move that effectively doubled our private-natural fit with our own GE Aerospace business, so we label credit card assets and enhanced our number one merged them, strengthening our overall aerospace [xr,i-Ixasition in that market segment. GEFS' 1988 integration tion. Several discrete RCA businesses that were not stra-of the 1987 Gelco acquisition created a leading poshion in tegic to us, such as the carpet company, were neither automotive fleet leasing as well as in the cargo shipping graftable to our 14 key businesses nor large and freestand-container business.

ing, so we distmsed of them almost immediately.

In all, we've invested some $16 billion in the 1980s on acquisitions. We would argue that some $15 billion of these funds has been very successfuh; invested. Only two niche electronics acquisitions-amounting to alx>ut $400 mil-But, for some reason, our trade of the merged lion -didn't pan out and were sold. Another $600 million invested in Kidder, Pealxxty has thus far had. - for a vari-ety of reasons - difficulty in reaching its [mtential. Even GF/RCA television manufacturing business to Thomson of so, Kidder increased its 1988 earnings 20% to $46 mil-France in exchange for its medical diagnostic business and lion -admittedly a small part of the total GEFS net of cash provo.ed some puzzling responses. Suddenly, the

$788 million; nevertheless, we see Kidder as a business l

manufiicture of televisions became something quintessen-with important synergies across GEFS that should become tially American,like baseball. Some felt we had betrayed more significant in the 1990s.

our heritage in oar compulsion to "do deals." We heard This track record gives us confidence in the acquisition phrases like: "En ~ merican," "giving up on manufactur-process as one of the means to strengthen our globallead-ing,""exportingjobs."

ership positions.

The fincts were these: The combined GFlRCA television in addition to acquisitions, we continue to invest in alli-business lost $125 million in the 1980s, was a cash drain ances andjoint ventures with other companies all over the and was number three or f our in the global market with no globe to enhance our 14 Ley businesses. In 1988 alone, we way in sight of getting to number one or two. Thomson's concluded alliances between GE 1.ighting and Toshiba of TV business, while profitab!e, was in a similar mar ket-Japan and between GE hiotors and Bosch of West Ger-share situation-stuck in the middle of the pack. Our many, and we expanded an alliance between GE Electrical trade with Thomson pnxlured the following results.

Distribution and Control and Fuji.

Thomson, including its new employees from GE, broke out of the pack, doubled its volume and moved into a number one or two position in the industry. GE, by acquir-ing Thomson's medical business, with its $1 billion in sales, and grafting it onto the already strong GE Afedical Sys-tems business, became number one in a game central to inally,in early 1989, we signed a series of historic our strategy. Exportingjobs? Some 21,000 of he 31,000 agreements with GEC of the United Kingdom that will t

jobs in the TV business had been overseas for a decade or open the door to increased European participation by four more. Ilurting employees? The employees in that busi-of our 14 businesses-- h1edical Systems, Appliances, ness, formerly endangered by being part of an also-ran m a industrial and Power Systems, and Electrical Distribution globai mat ket, now have the reach and volume that gives and Control. This move appears complicated on the sur-tk an a real shot at winning.

face because there are four businesses involved, but it is j

We think it is one of the most important, logical and driven, once again, by the simple so ategy dictring that we universa!!y beneficial moves made anywheie in the 1980s advance our 14 budnesses, on a global basis, whenever we j

-a win for the employees of the GE/RCA television busi-can, consistent with a consistent strategy.

ness, a good deal for Thomson and a Le victory for a in addition to acquiring, divesting and forming alliances high-technology GE manufacturing business-hiedical to support these key businesses, we continue to supply Systems - tnat is now the global technology and market them with resources to propel their internal growth -

leader.

investirg close to $16 billion since 1981. In 1988, we made The divestitures we've made in the 1980s have pro-a multiycar, $1.8 billion comniitment to build a Spanish duced $9 billion in cash, which has been used for acquisi-plastics complex that will supply the European market, we tions to strengthen our 14 Ley businesses. In 1988, we committed another billion dollars to further fuel the purchased Borg-Warner's chemicals businesses to expand strong growth of GE Financial Services, and we spent a GE Plastics' global market basket. In addition, re imught total of more than $1.8 billion on new plant and equip-ment. Another $3.6 billion-about $1.2 billion funded by the Company-was spent on research and development, almost exclusively in sup[mrt of these 14 Ley businesses.

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To those who perceive us as institutionally fickle, we

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would point to two of our key 14 businesses-Transpona-

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tion Systems, which is mainly kicomotives, and Industrial

.i and Power Systems.150th went through purgatory in the 1980s,in the Ix>ttom of market troughs of several years' l

duration that saw few orciers in kicomotives and none in j

large steam turbines.

Instead of closing or selling these businesses, we reduced their costs consistent with the market, invested to make i

them more competitive ($300 million in locomotives j

'.i alone) and stuck with them through the lean years - not k

out of sentimentality or inertia but because they are large, world-leading businesses with big potential and because I

doing so fits our strategy. Anct in 1988, we saw a significant market revival under way in kicomotives and the approach-i ing dawn of a revivalin areas of the turbine business.

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'f That, then, is the first part of our strategy: Creating a company consisting only of worki-class global businesses l

that can compete and win in the 1990s ami beyond. The focus of our R&D, investment, acquisitions and alliances -

_. f everything we do-is ensuring the growth and vitality of 7

those businesses.

l Chairrnan of the Boardand Chief fxecutive Officer John f We'ch, Jr. (centerlis flanked by he second part of the strategy, as we mentioned, is Vice Chairinan of the BoardandExecutive making this $50 billion enterprise as lean, as agile and as

$),,1', "",,[,8darI[fec'ft, e N" 'er light on its feet as a small company-a big company with

,f Edward E. Hood. Jr. (right).

the heart and hunger of a small one.

We've been grappling with how to achieve this unbeat-able amalgam for the entire decade, and, while we haven't yet achieved it, our progress is accelerating. Once again, the actions we have taken are totally consistent with our oft-stated theory of the case.

We believed layers of management were " big-company" encumbrances - so we reduced ours from nine to as few as four, from us in the Corporate Executive Of fice to the facto:y fkx>r of any given business. In the mid-1980s, we made a calculated gamble and removed the entire second and third echelons of management in the Company -

layers we called sectors and groups. The 14 key businesses now report not, as often in the past, to senior vice presi dents who report to executive vice presidents-all with staff entourages-but directly to us three. This arrange-ment is dependent for its success on the quality ofleader-ship at the business level. We gambled that we had that quality, and we won. The new arrangement has proved breathtakingly clean, simple and effective. Ideas, initiatives and decisions move, often at the speed of sound - voices

- where once they were muffled and garbled by a gaunt-let of approvals and the oppressive ministrations of staff reviews.

Secondly, we found omwelves in the early 1980s with corporate and business staffs that were viewed -and 3

=

viewed themselves - as monitors, checkers, kibitzers and despite our mix of global cultures and enterprises, an approvers. We changed that view arxl that mission to the American company; and, as such, our system, while pro-1xiint where staff now sees itself as facilitatory, advisor and viding no guarantees, also has the fewest barriers to partner of operations-with a growing sense of satisfac-innovation,imidness and risk-taking-the stuff that will

' ion and ax>peration on both sides.Territoriality has given propel the real winners in the 1990s.

way to a growing sense of unity arx1 common puipose.

And that's the "why" behind our program ofliberation The third step toward a small-company management and empowerment - more fulbiling work for all and system began in 1988 when we fonnulated and began greater competitiveness fo our Company. The werst thing j

planning a project we call " work-out." This will be an we could do is to stifle with bureaucmcy our employees -

intense and continuing program, corxlucted within the the Americans and Germans, the French andJapanese, and businesses arxl with supixart from the Company's manage-the scores of other nationalities that are now pan of the ment institute, to " liberate" tiie employees of our Com-global GE. If we did, we would then have none of the pany from the cramping artifacts that pile up in the dusty advantages of our competitors-and many of the encum-q attics of century-old companies: the reports, meetings, rit-brances that burden them all. We won't let that happen.

uals, approvals, controls and forests of paper that often if we can become that big-company /small-company seem necessary until they are removed.

hybrid while pursuing our global strategies and encourag-ing even more lx>ldness in the leadership of our busi-m sses, we will be within striking distance of the goal we set out in pursuit of eight years ago: We will be a more con-temporary, more accessible, more responsive company, in touch with our customers, finnly in control of our s we succeed over the next three years in ridding own destiny, driven by more-fulfilled people in control our Company of the tentacles of ritual and bureaucracy, oftheirs.

we are now better able to attack the final, and perhaps the We are on the brink of the most exciting arxl opportunity-most difficult, challenge of all. And that is the empowering rich decade in world business history. We appmach it with of our 300,000 people, the releasing of their creativity and a strategy that has been both consistent and very successful ambition, the direct coupling of theirjobs with some jmsi-during the 1980s. If this summary of the strategy we have tive effect or, the quality of a pnxluct or service. We want once again presented in this letter is clear, you will have no each man arxl woman in this Company to see a connection difficulty understanding everything we do in the 1990s.

between what he or she does all day-and winning in the And we intend to do a lot.

marketplace. Their roles, responsibilities and rewards must become clear to them and to everyone. Small compa-I nies thrive and grow on that sense of contribution and 1

reward. We want it as well, and everything we do to evoke our management system will be consistent with getting it.

p,gg Liberation and empowerment, as we use the concept, Chairman of the lloard and stems from what we beh. eve is a very solidly grounded view Chief Executive Officer of winning and losing areund the world. We, as a globally competing company, have some serious disadvantages as we line up against our foreign competitors. Some of those competitors enjoy protection from foreign inroads into their markets; others are financially supported by their governments. Smne are beneficiaries of nation.lly focused Lawrence A. Ilossidy R&D in key technologies. Others are part of regimented, Vice Chainnan of the floard and paternalistic cultures that serve them well.

Executive Officer We complain, on occasion, about all of this, but it is we j

who have the ultimate advantage, one that few of us,if j

pressed, would ever wish to tmde. It is the fact that we are, Edward E. I hxx1,Jr.

Vice Chairman of the lloard and Executive Officer February 10,1989 4

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.p n ac Manayst Carla Knauerlieft) of the Virginia Beach, Va., store discusses new credit prog.ms with Tom Doyle and Kim luckes of Montgomery Wan' Credit Corporation, which is now part of GE Finar,cial Services.

GE FinancialServices(GEFS) had GE Capital's conunercial real munications, financial services, strong growth in 1988. One of the estate opemtion expanded its earn-medical, retail and manufacturing most diversified participants in the ing assets in 1988 by continuing to markets.This GE Capital business global financial services market, it fbcus on its highly successful also expanded geographic basesin reached almost $75 billion in assets, approach of financing well-utilized Canada and the United Kingdom an increase of atxmt $14 billion, and existing properties.

in 1988.

grew earnings 43% to $788 million.

Full-service kasing also continued Also during the year, GE Capital to expand. One of GE Capital's fast.

arranged to acquire, subject to cer-GEFS has three subsidiaries-GE Capital Corporation, Employers est-growin g areas,it includes auto tain approvals, FGIC Corporation, Reinsurance Cor[x> ration and Kid-and truck leasing; trailer and space an insurer of municipallxmds. In der, Peatxxty Group-that operate leasing; the leasing of more than mortgage insurance, GE Capital 17 different financial and asset man-47,000 railcars: Genstar Container rquired Foremost hlortgage Insur-apw 4 Wisconsin.

agemet" husinesses.

Coqxn a' ion, the world's largest GE Capital, with $42 billion in lessor of shipping containers; and Employers Reinsurance Corpora-e uning assets,is a major suppher of Polaris Aircraft 1. casing, the world's tion, the second largest pmperty capital and fmancial expertise to largest lessor of commercialjet air.

and casualty reinsurer in the United U.S. business. During 1988,it made craft. Another area of settice States and fourth largest in the gains in retailer financing, commer-involves 18 auto auctions.

world, increased its net written pre-cial real estate, Ileen leasing, corpo-In addition, GE Capital strength, miums and earnings again in 1988.

mte restructuring, auto auctions ened its position in truck leasing by This company, with $4 billion in and mortgage msurance. It also forming ajoint venture with the assets, has increased earnings each gained a first-place position in con-Penske Coqmration. When com.

year since it was acquired in 1984.

tainer leasing, bined widi GE Capital's existing Ridder, Pealxxly spent 1988 in private-label credit cards, GE fleet, the resulting business has re[x>sitioning to meet the future in Capital acquired the hiontgomery more than $1.5 billion in assets and its highly competitive trading, retail Ward Credit Corporation and its six 55,090 vehides.

brokerage, ins? utionalbrokerage million active customers. With this and investmen mking fields.

In structuring and financing

[xntfolio, GE Capital now authorues leveraged buyuuts and corporate Kidder, Pealxxt. operations were more than three nulhon consumer restructuring, GE Capital contin.

profitable in 198M.

purchases each week.

ued its conservati e but creative One of GEFS' strongest 1988 This transaction was part of a approach. In addition to the blont.

thrusts was into foreign markets as

$3.8 billion leveraged buyout of gomery Ward transaction,it pro, non-U.S. assets more than tripled to hiontgomery Ward & Co., a deal vided financial restructuring

$3.5 billion.

also partially financed by GEFS.

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.,m Plastic parts for tomorrow's automobiles go through a series of tests at GE's Application Development Centerin Southfield, Mich.

Reviewing test results are (left to right) Susan Nasiatka. Tracy Williamson Doug Wright, Ray Kolberg and Tony Kielisawski.

GE Plastics marked a true milestone is a recently fi>rmed global market-ing technology. To that end, GE is year in 1988 as this business pre-ing organization. The new group is establishing a major process devd-pares for another decade of growth dedicated to providing a single, opment center in Pittsfield.The in the 1990s.

fi>cused pnxluct and market strat.

facility, over 100,000 square feet This business saw its third straight egy that addresses the growing in size, will feature the Alpha 1 year of record sales and earnings.

international markets of today.

machine, the world's largest, most Even more imIxntant was the Major markets forthe plastics advanced multiprocess machine fi>r acquisition in September of11,rg-business will continue to be led by plastics. The new facili.y is scen as a Warner's chemicals businesses, the

{ workrslargest pnxlucerof ABS the automotive industry. A g(xxl key resource in maintaining world i

example: The 1989 Cadillac Fleet, leadership in the high-perfi>rmance thennoplastics. ABS is one ofindus-wood and DeVille models feature plastics business.

try's mos: versatile materials atul is the enhanced value ofimpact-Al ng with thermoplastics, highly complementary to GE Plas-resistant front femiers made from GE Plastics also markets several tics' existing materials portfolio.

Noryl* GTX resin while the txidy other high-perfi>rmance mate-The two businesses will combine rials. Fi>r example, GE Silicones side claddingis made from Xenoys excellent commercial teams and resin and the front fascia and rear recently announced a significant similar global marketing strategies, fender extensions are made from breakthrough in UV-curable The Cycolar* ABS resin line will tomod* engineering clastomers, all e[xixy-silicone technology. The be one of the first pnxlucts to go fnnn GE Plastics.

new, solventless material, which into pnxtuction at GE's recently Work continues on he GE Plas-was devek>pedjointly with the announced European expansion in tics "1.iving Environments" concept Company's Research and Develop-Cartagena, Spain, house in Pittsfield, Mass. It is a ment Center in Schenectady, N.Y.,

in the Far East, a new ABS resin working laboratory fiar the building will initially be used in a coating sys-com[xiunding plant will be built in and construction industry. The ini_

tem fi>r labels, tapes and other Ilong Kong. A new polycarixmate tial step will be pouring the fi>un-pressure-sensitive adhesives.

pilot plant, utilizing a new [x>lymer dation using unique, lightweight GE Superabrasives, which began pn> cess, was recently completed in fi>nns made from a GE Plastics with GE's invention of%n-Made" Japan; and a new technical center material.

diamonds, today pngluces a broad and con l[x>unding plant are under in the packaging industry, a pat.

range of abrasive materials fi>r high-way in horea.

ented new PPO2 fi>am tray is being tolerance apphcatmns m the world-Complementing this growing intnxluced fi>r the fast-growing wide construction, automotive and worldwide manufacturing network microwave-ready fixxl market.

aen> space industries.

All of these market innovations require advanced [xilymer pn> cess-7

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GE MedicalSystems achieved addition to its already leading posi-Meanwhile, the U.S. arm of GE h

strong gains in orders, sales and tion in the U.S. market.

Medical Systems continues to lead earnings over the record levels Globalization also has provided the way in the premium MR and

[x>sted in 1987.

substantial benefits in technology, CT segments with products such Several pnxiuct lines drove these products and human resources.

as the Signa

• system and the excellent results, especially mag-General Electric CGR, for exam-CT 9800 Quick scanner. They both netic resonance (MR).The MR busi-ple, adds a world-class x-ray team maintained their technical pre-i ness returned profits for the first with leadership pnxtucts such as eminence with software improve-l time in 1988 after investments of Senographe" x-ray mammography ments that extend their perform-l about $300 million since 1979.

systems, advanced vascular systems, ance and versatility.

Today, the Company has more remote-control systems and radio-Other major pnxluct introduc-CT scanners and more M R systems therapy equipment.The new tions included a new Advantx" dig-installed worldwide than any other Radius" Doppler system with inno-ital x-ray system for angiography manufacturer. Both types ofimag-vative radial array technology was and the new Starcam" 2000/3000 ing systems were pionceied by GE's intnxluced, giving GE an exception-nuclear imaging line that features Research and Development Center.

ally strong entry in the premium rectangular-field detector technology.

Gb participation in diagnostic segment of the ultrasound market.

While technical pre-eminence is imaging markets was substantially A new Paris headquarters facility required in the global diagnostic lxx>sted in 1988 by the integration has allowed the various manage-imaging market, customer service of CGR intoits global operations ment functions to be consolidated and satisfaction also are keys to and by thelaunch of GE Medical at one h> cation.

achieving market differentiation Systems-Asia, a new manufacturing, From the other side of the wor!d, and a sustainable competitive marketing, sales and service orgam-GE's 7MhownedJapanese joint advantage.

zation in the Far East. CGR was venture, Yokogawa Medical Systems In 1988, GE Medical Systems acquired from Thomson, S.A. of (YMS), contributes a line ofimaging continued to expand its offering of pnxtucts to GE customers around customer-oriented senices and sup.

France in late 1987, General Electric CGR, the combi-the globe.These include the self-lx>rt. Included were innovative nation of CGR and existing opera-shielded MR Max" midlicid mag, financing packages, new equipment tions in Europe, and GE Medical netic resonance system and an maintenance options and a renewed Systems-Asia give GE a highly com-extensive line of outstanding ultra.

conunitnx nt to pnxtuct quality and petitive position in Europe arxl the somxl prrxiucts. YMS' broad CT inarket responsiveness.

Far East-two of the world's largest line was strengthened by the debut medical equipment markets-in of the new CT Max" 640 scanner with enhanced image display.

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The National Broadcasting Company ' agreement with Reuters aixt the system (br U.S. broadcasters shouki (NilC) bekt its commamling Lad as illlC gave NilC News a '18% inter-be compatible with existing home the nation's most successful and est in Visnews, a worklwide video TV receivers. This is a favombic profitable television network in news gathering organization.

development tbr viewers who cur-1988 while exploring new cable NilC Sports also had an exciting rently rely on terrestrial broadcast-op;x>rtunities in the rapidly chang-year, covering both the 1988 Sum-ing or cable and for the Advanced ing mar ketplace.

mer Olympic Games ami the 1988 Compatible Television (ACTV) sys-Ihr the iburth year in a row, NilC Wodd Series, and fbliowed that with tem sponsored by NilC and others.

led in prime-tin.e ratings, winning Super flowl XXIll in early 1989.

Taking a major step into the 47 of 52 weeks. Television advertis-NilC, which also won U.S. broad-cable TV business in 1988, NilC ing revenues are lused on ratings cast rights to the 1992 Sununer announced the formation of CNitC, performance.

Games, dominated the ratings dur-the Consumer News and llusiness lleading the NilC cast of pn>-

ing the 180 hours0.00208 days <br />0.05 hours <br />2.97619e-4 weeks <br />6.849e-5 months <br /> devoted to the Channel-a 24-hour, consumer-gnuns was "The Cosby Show,"

XXIV Olympiad at Seoul, South oriented business news prognun w hit h entered iis fifth season as Korea. For the five-game Worki senice. CNilCis scheduled to

'lYs highest-rated series. "Cosby,"

Series Letween the los Angeles begin in 1989 with about 10 million

" Cheers,""A Different Workl,"

Dodgers and Oakland Athletics, subscribers.

"Goklen Girls" and two new hit NilC's ratings exceeded what AllC NilC also announced a major comedies," Empty Nest" and " Dear had dmwn in the first five games of cable programming venture with John,"gave NilC six of the top 10 the 1987 Series.

Cablevision Systems Corporation series at year's end.

The NBC Network currently serves under which NilC willobtain 50%

"'lixlay,""The 'Ibnight Show more than 200 affiliated stations in of Cablevision's interest in nine pro.

I StarringJohnny Carson" and "1. ate the United States. In addition, NilC gi nuning senices.This includes Night With David 1.etterman" con-owns and ogrates seven TV sta, SportsChannel America,a new tinued to outpace their competition.

tions kicated in Chicago, Cleveland, n tionalcableservice that NilC Furt hering its innovative leadership Denver, Ins Angeles, Miami New will help develop and manage.

in late-night television, NilC suc-Yoi k and Washington, D.C.

NilC also will pioneer the develop-cessfully launched the talk show During 1988, NilC sold all but n ent of a 1992 Sununer Olympics "1.ater With flob Costas."

one ofits eight radio stations as part pac kage fbr pay-per-view cable, 11 was an extremely busy year i" of a planned exit from the radio which will be in addition to its free TVjournalism. In presidential pri-business.

over-the-air coverage to U.S. homes.

mary, convention, drhue and cler-The Fedeml Communications A new division, NilC Cable, was tion coverage, NilC was the most-Commission tentatively ruled that created to manage these and other watched network. In addition, a" any future high-definition television cable TV and media initiatives.

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GE Aircraft Engines extended its 17 aircraft per month. Each is pow-the U.S. Air Fi>rce arul five fi> reign long string of global successes in the cred by CFM56 engines.

governments as well as for the U.S.

I' commercial, military, marine and The CFM56 engine has been se-Navy's F-143. Technical advance-industrial engine and aviation serv-lected for the majority of A320s on ments are being incorix> rated into ice markets during 1988.

order worldwide. Significant cus-the F110 Increased Perfonnance For example, seven new cus-tomers indaded 1.ufthansa, North-Engine now competing for use on tomers ordered the CF6-80C2 west and All Nippon Airways. Work the U.S. Air Force's upgradedjet engine for their new commercial also has begun on an increased-fighters. Switzerland and Kuwait wideixxty aircraft, bringing to 41 thrust version of the engine to ordered F/A-18 jet fighters, which the total number of CF6-80C2 cus-1x>wer the new long-range A340 are powered by GE's F404 engines.

tomers. Once again, this popular aircraft, which is scheduled to enter The Air Force also unveiled the GE engine was the world's best-senice in 1992.

Ib2 AdvancedTacticalllomber, selling high-thrust engine.

GE continues to take the lead in Iwen d by Fi 18 engines fnnn GE.

new aviation engine technology with Engines fi>r the Navy's Advanced GE is determined to maintain that Tactical Aircraft and the Air Force's leadership wellinto the 1990s with further development ofits UDia the continuing develo[nnent of the engine, which may revolutionize the Advanced Tactical Fighter also are CF6-80El engine. This advanced industry over the next decade by under development fi>r the 1990s.

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version provides for a future per-drastically reducing fuel consump.

Adding to the 1988 success story, finnnam e capability in excess of tion compared with t<xlay's conuner.

the 1.M2500 marine engine was 70,000 [x>unds of thrust for the cial engines.The UDF* engine selected by two more navies to heavier twinjets of the f uture.

continues to be actively considered ix>wer surface vessels, bringing the current world total to 19 GE-The CFM56 engine, marketed by fi>r short-to-medium-range aircraft GE and SNECMA of France, contin-for the 1990s.

ix>wered navies.

ued its record-breaking sales per-GE's military engines scored sev.

Recognizing the critical role cus-3 fonnance. More than $6 billion eralimportant wins in 1988. The tomer senice has played in GE's jf worth of CFM56 orden, were T700 engine received a third multi.

attaining its current world leader-announced in 1988 alone to Ixiwer year procurement contract fnnn the ship insition, GE is placing an even Airbus A320 sand A3los,ik>eing U.S. Anny to ix)wer lilack Hawk greater emphasis on sening cus-737s, U.S. Air Force KC-135R tank-and Seahawk helicopters.The U.S.

tomers. liy continuing to improve ers and other military aircraft.

Navy selected in kheed'nntisub.

its global network of pnxluct senice llecaus ofenonnousdemand for marine aircraft, which launched the and support for an expanced cus-the 737 family of twinjets, th>cing new GE38 turix> prop engine.

tomer base, GE Aircraft Engines announced a pnxluction increase to Also, GE's F110 fighter engine con.

aims to ensure cominued s access wellinto the future.

tinues in pnxtuction for F-16s for to

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uing its emphasis on new product at the same time reducing invento-In addition, GE's new high-development, ries and improving pnxtuctivity.

hunen, biax fluorescent lamps are Internationally, GE I ighting Thelargest ighting manufac-gaining enthusiastic acceptance l

accelerated the marketing of new turer in North America, GE 1.ight-among customers based on the energy-ellicient lighting pnxlucts ing currently offers more than lamps' efficiency, compactness and in Europe. It also established ajoint 6,000 different lighting pnxtucts color rendition.

venture with 'Ibshiba ofJapan to for the connnercial, industrial and Other 1988 highlights included cmxluct research aixldevelopment consmner markets. These include the de sign of a new lighting system prognuns, tojointly manufacture incandescent, fluorescent, high for the Washington Monument with lighting pnxlucts awl to partici-intensity discharge, halogen arxl GE lamps and fixtures providing paie in market development opix>r-specialty Lunps bright, energy-efficient lighting tunities in the Asia Pacific region.

Consumer preference for GE's wide fin thelandmark,and thelighting Domestically, GE 1.ighting posted nmge oflighting pnxtucts was of the National Christmas Tree in substantial puxluctivityimprove-boosted in 1988 by strong TV arxl Washington, D.C., for the 25th year.

ments, providing funds fbr invest-print advertising pn>gnuns ainx d at GE 1.ighting also added Chicago's ment in new programs and new reinforcing brand awareness. In Wrigley Field. home of the baseball pnxlucts. It also imp oved its cus-j addition, GE I.ighting began sym.

Cubs, and Philadelphia's Veterans

, tomer service with the imi,6nenta-l sorship of the IlhuniNations light Stadium, home of the baseball Phil-tion of an innovative distribution show at EPCOT Center in Florida's lies and foo: ball Eagles, to the long prognun called "1.ighting Express."

Walt Disney Wodd. This nightly list of sports stadiums lighted by GE.

A key feature of the"1.ighting extravaganza features five miles of Express" prognun was the consoli-GE light hulbs and will be scen dation of 25 order entrv facilities annually by nine million visitors, into one world-claw customer serv g y,Ljng to t he future, GE 1.ight-ice center in Richmond, Va.

ing's research has generated techni-ca! developments that are creating advances for headlamps on the cars 11

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Technicians in Greenville. S C, work on oce of three GEgas turbines being prepared for export to Egypt for u:e in a powerplant.

GE Industrial and Power Systems desulfuruation systems, beating out improved quality li>r steel mills aml continued to face accelerated seven international competitoa.

other customers.

change in its mar Lets during 1988.

A transition fi>r this business Another priority is sustaining Major global alliances arxl merg-began in 1988 as emphasis shifted GE's superior customer senice.

ers restructured the competitive from an era of downsizing to selec-Engineering and manufacturing landscape, resulting in fewer but tive rebuilding. Faced with intensi-resources, li>r example, are focused more formidable competitors as the fied global competition and the on prognuns that sup[x rt the suppliers of[x>wer generation and prospects of a more robust market 12,000 GE turbines oirrating in 97 e1 delivery equipment move aggres-in the 1990s, GE moved forward on countries. Upgnale prognuns for sively to gain economics of scale and programs to improve its competitive older GE steam and gas turbines not greater access to world mar kets.

stance in all major prmluct lines.

only exteint prmluctive life but also Already well es'ablished in world For example, on the heels of improve e iencies.

mar Lets with $5 billion in sales, this spending more than $400 million GE Nu-tr.r Energy continues its GE business moved to strengthen its on restructuring arxl consolidation, conunitm.it to provide customen global base in 1988. It now has 74 GE has earmarked an additional with the highest quality supix>rt alliances with 63 different compa-

$500 million for reinvestment in the senices and to be on the leatling nies around the globe, and it is 1988-1991 time frame. Technology edge of nuclear fuel technology.

actively exploring other alliances development continned to receive Other customer senice prognuns that could bring additional technical high priority as GE moved to are fi>cused on reducing delivery and global marketing strengths, advance world leadership positions cycles for critical parts and improv-Success in penetmting offshore in its turbine and other industrial ing GE's field senice network.

and mer systems businesses.

Prospects for the 1990s are markets has helped offset a soft i

domestic mar ket in recent years.

This technology leadership is most encouraging. Key industries, such Foreign shipments accounted li>r evident in today's worldwide interest as paper and metals, are reinvesting over one-third of [x >wer generation ami acceptance of the new "F" gas to improve their competitiveness.

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revenuesin 1988.Over20% of the turbine models. A 7F unit, which set There also are signs that a long-a current backlog is slated fi>r off-new standards fi>r eflicient use of aw ited reinvestment in the U.S.

shore installation, including large fuel, was shipped to Virginia Electric utility infrastructure is beginning.

steam turbine-generators for %orea, Power in 1988.

Maintaining a strong competitive Taiwan and China.

GE's advanced solid-state meters leition will be key to GE participa-GE also received a $93 million and electronic relays are winning tion in what promises to be a strong i

conunitment from the Taiwan wide acceptance in tnmsmission and market with fierce competition.

Power Gompany for two flue gas distribution. Advances in indust rial drives and controls have resuhed in i

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This totally GE-equipped kitchen includes a gas cooktop and other major appliances designed with convenient features to make Ide easier and more enjoyable for homemakers.

GE Appliances made significant as among the outstanding new featured nuxlels as a 27-cubic-fix)t strides during the year to pnxluct designs by Eminen @k side-by-side refrigerator with strengthen its [x>sition in Ix>th magazine.

Refreshment Center.

domestic and wodd mar Lets, driven Serving the high-end kitchen GE Appliances also made strong by its long-tenn strategy to concen-design market, the hlonognun line gains in the private-label market t, l trate resources in core pnxtuct lines.

added three new pnxluct offerings hedge against a mature appliance The 1988 anguisition of the in 1988. Included were 24-inch industry in the United States. In Roper Cor;x> ration am!its range counter-depth refrigerators with ice panicular,it began manufacturing manufacturing facilities, for exam-and water dispensers in the doors, refrigerators and ranges fbr Sears plc, served to increase GE's position downdraft nuxlular cooktops and under the Kenmore label.

i in the gas range market. GE Appli-gas-fueled ax>Ltops.

In addition, GE is participating in ances has been in this market Ihr Romuling out die third phase of Sears' nationwide rollout of"Isrand only three years arul already is an its investment in top-mount, no-Centnd" centers. At these centen, industry leader.

frost refrigerators, GE Appliances the GE brand will be availablein The total U.S. markt leader in intnxtured new 18-and 19-cubic-such major appliances as refrigera-major appliances with $5 billion in foot nuxlels. They inc'ude features tors, cooking pnxlucts, dishwashers revenues, GE once again added to that have been popular with con-and home laundry equipmcnt.

i its seputation for quality scivice and sumers on larger nuxlels, such as During 1988,GE Appliances innovative pnxluct design in 1988.

deep-<hx>r storage and inacased experienced a problem with a new in customer service, the U.S.

internal capacity.

type of rotary compressor in certain Office of Consumer Affairs nann!

l Because of high dealerinterest and large refrigerator nuxlels. There is The GE Answer Center

• servite as the state-of-the-art toll-free cus-l' consumer trust in the image and n safetyissue involved, and the quality of the RCA brand, GE husiness is in the midst of an active tomer assistaru e number now oper-

.sppliances will add RCA to its exist, canipaign to replace every one of ating in the United States.

ing GE, Slonogram and llotpoint these compressors with minimum in pnxtuct design, the GE bnuul bnux! names. lleginning in 1989, a inconvenience to customers. The dishwasher was selected by Fortune fullline of RCA appliances willbe aim is to come out of this situation magazine as one of the year's top distributed directly to dealers witt, the Company's reputation 100 quality pnxlucts. And the thn> ugh GE Appliances' sales and ihr customer support and satis-j custom-kitchen hlonognun line of distribution organizati m.

iiiction not only intact but -if built-in appliances was recognized

.lhe llotpoint line of appliances, anything-enhanced.

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A worldleaderin solid state radar technology GE currently has orders for or has ddivered more than 90 of these long range air defense systems GE Aerospaceis one of thelargest lluildng on its tradition in space on a program to design ami develop and most divenified manufacturers prognuns, GE Aerospace won a a combat system for the U.S. Navy's in its field.

contract worth over $260 million to new Seawolf submarine.

With annual sales over $5 billion, provide NASA's Scumd Tracking Other highlights for this business GE Aerospaceisaleaderin many and Data Relay Satellite System in 1988 included a contract from unuluct lines.These nmge fmm GromxlTerminal.

the U.S. Navy 'o study an anti air i, dar air defense systems to com' Nine new GE-built satellites were defense system for NATO. GE heads a multinational team of 10 i,.unications systems and satellites.

launched during the year. GE televi.

upanies on this project.

They also include military data sion cameras and radios perfbrmed c

systems, visual simulation systems, Ilawless!y as America's space shuttle Another major development was aircraft electmnics, automated test returneil to flight status.

a $90 million contract from the systems, submarine combat systems, in addi ion, GE Aerospace was U.S. Navy fbr an air defense system armament syst-ms, transmissions awarded a Gve-year, $235 million for theJapanese Maritime Self Defense Foire.

and turret stabilization systems contract fbr systems engineering for tracked vehicles, fire control and integration fbr the nation's Stra.

GE continues a vigorous pnw and guidance systems, and surfire legic Defense Initiative program.

gram within GE Aerospace and

} sh!p sonar.

In the radar business, orders were other businesses holding U.S. gov-In the face ofintensifying compe-received for the manufacture and ernment contracts to comply with tition and a slightly declining installation of solid-state radars in contracting and pmcurement reg-domestic market, GE Aemspace Icelaml and West Germany.

ulations and to self-police its con-experienced a 13% improvement in Two U.S. Navy cruisers equipped tracting activities.

orders in 1988. It also took aggres-with the GE-developed Aegis Ileet Despite this, GE was indicted in sive action to provide Ihr future air defense system were commis.

November 1988 for alleged acts that occurred in 1983 in MATSCO, competitiveness by streamlining its sioned in 1988. Aegis systems were organization to reflect market delivered for ihree ships, and pnr a subsidiat y of GE Aerospace.The trends,by reducing costs signifi-duction was under way for use on Company views this indictment as cantly and by increasing pnxluctivity.

16 odier cruisers and destmvers.

unfair ami overreaching and

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The U.S. Navy also awarded GE l

Aerospace a $277 million contract for the integration of antisubmarine warfare systems on surface ships.

l During 1988, work also progressed

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Communications and Services O>mputer. It also offers a system lxiard facility in Salisbury, N.C., that that allows treasury managers at furthers the Company's competi-international banks to monitor arxl tiveness in rapidly developing inter-control the risk of dealing in inter-national markets.

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national currency markets.

As an industry leader in the man-GE Consulting Services, an infor-ufiteture of products fi>r the distri-mation systems and professional bution, control and protection of t

senice consulting company, pn>-

electrical [x)wer, GE continued its vides custom software solutions to program ofintroducing innovative communications, financial anxi pnxlucts to the marketplace.

manufacturing clients.

A newly designed safety switch, b(

GE Mobile Communications molded from Valox* thermoplastic meets the growing need for mobile from GE, met strong acceptance in land-based communications with the growing retail home improve-1

\\

prodects ranging from hand-held ment market.The unit offers the

?

two-way radios and cellular tele-do-it-yourselfconsumer signifi-s phones to new trunking systems. In cantly improved product features CF Americom's large dishlike antennas in New 1988, it started shipping the largest and benefits while providing the Jersey and California keep track of GE's / leet of international order in its history - a business with increased cost advan-orbiting communications satellites

$35 million contract from the King-tages. Additional new" automation-GECommunications and Services dom ofJordan.

designed" pnxlucts will be intro-GE Government S.enices per-duced to the market during 1989.

prmides communications equip-ment and services, infi>rmatum forms various technical, profes-GE Electrical Distribution and senices, installation services and sional and management services in Omtrol also announced a sales the United States and abroad fi>r joint venture in the Middle East fitcility maintenance for businesses, govermnent customers and GE and S,outheast As.ia as another step govenunents arxl u.xlividuals that components. In 1988,it won a in strengthening its previously use satellites, computers and other adv mced technologies.

contract to provide and maintain announced strategic alliance with I his business, which had reve-aemstats, which are tethered, radar.

Fuji Electric of Japan. In addition, equipped balkxm surveillance sys-the Company continues to explore nues of.more than $1.6. bilh.on arxl tems, for U.S. Customs S,ervice use reconi carnings in 1988,is com-opponunities with lx>tential part-

[x> sed of f.n e diversc operatiny m the federal government's drug ners in Europe and North America 1

units. Sale of a s.ixth unit, G. E Lom-mterdiction program.

to increase the global competitive-i i puter Sern.ce is expetted to be ness of this business.

! cmnpletedduring 1989.

ElectricalDstribution

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GE American Commum. canons I (Americom) continued its leader-Odd bONtTOl

, ! y,. ; MN,y

+h' i ft

.J 4

I ship in domestic commercial satel-j lite senices in 1988. It was awarded j In addition to approaching the b'

a long-tenu contract with Ahascom, billion-dollar sales mark during the Y2 the Alaskan longlines phone com-year, GE Elecuical Distribution and W^,

M' pany, for up to 16 trans[xnxiers on Control made significant advances I

a new satellite to replace Alascom's in the areas of cost-competitiveness 7_

~

u-present satellite in 199 :

and strategic alliances.

I Sb " ' ~

GE Infi>nnation Senices has one l

Dapite higher-than-anticipated

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4 of the wm kl's largest commercially r

cast nereases for commodities and MM. I: ;

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available teleprocessing networks. It steel, this business continued to

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offers a broad range of techmcally achieve strong earnings growth due MD(

advanced computing aml value-to record working-capital turnover "D

added communications senices for e

and impmved prmluctivity. It also

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ni net work-based business applications concluded the final phase of a mdor f

h arNi S) stems integntlion. for exam-apitalinmunent project,induding

^

I)le' it I>rovides the worldwide dealer Cupided circuit hmahr panelbaards plide the automation of a lfghting pancl-down conveyorspasf Werne Mosher a.r the communications system for Apple 1sighly automa ted Saksbury N C, plant.

15

]

Motors Transportation Systems Building on theleadership position 100 loconx>tives included in a multi-established by its Dash 8 loconu>-

year commitment based on per-tive, GE Trams [xntation Systems is fi>rmance guarantees in the agree-Ag' implementing a se Tice-driven ment. CSX placed its first order fi>r organization, pursuing global part-Dash 8s. Conrail, Norfi>lk Southern, a

nerships arxl continually improv-Santa Fe, Southern Pacific, arul ing its cost structure.

the New York, Susquehanna aixt The Dash 8 delivers new value to Western all added Dash 8s to exist-railroads worldwide as a result of ing fleets.

GE [nugrams to Ix>ost Imrseix>wer a!xt tractive effort while improving fuel efficiency alul reliability.

FaClory AuloMalloN The service structure oi UE Trans'y riation Systems encom.

New motors from GE, awaiting installation into Trene variable speed heat pumps and air condi-pa%%c8 InlI'SeTYECC SnPPOYI OI. l'h5 h,

.wers, help make the units more efficient.

"gx nyer-by-the-hour" locomotives. It

.(

also includes partial service in sup-GE Motors made several strategic

[x>rt of performance guarantees for 7

moves in 1988 to build on its posi-the Union Pacific and Southern tion as the world's leading pnxlucer Pacific railroads. In addition, GE

~

GE strengthened its technology remanuliictunti equipment.

- /y'

' J;,.

of electric motors.

offers customers several options fi>r l

,'j "[

leadership with the intnxtuction of Alliances beymxl the U.S. boniers variable speed, elect ronically com-have pn duced the Company's first

~0 mutated motors and contn>ls for Dash 8 kx omotive order from Can-U advanced heating and air condi-ada and five successful bids totaling tioning systems that of fer greatly 10 kicomotives fi>r Australian rail-GE and GT fanuc equipment controls this auto-increased efh..aenacs.

roads. In addition, a new agreement matedprocess for casting engine heads or GM s GE Ntotors also pn xhired a new with N!itsui will help secute financ-saturn automobile plant being buit in Tennessee.

line of dishwasher a!xt dryer motors ing for equipment sales to thini-for major appliances. In addition. it workt countries.

GE Fanue Automation Corporation, intnxluced a line ofindustrial Orders in 1988 were the lughest the 50/50 joint venture between GE i

motors with industry-leading oper-in recent years.They were led by and FANUC Limited ofjapan,is ating elliciencies and continued to Union Pacific's order for more than achieving solid growth.

exp.uul its designs li>r ihe growing Despite consolidation moves by a leisur e maikets encompassing number of major competitors, GE pmls, spas and exercise machines.

/

N' N

the market during 1988. It gained Fimuc Automation outperli>nned The business improved its global

e. 7 position with pnxluction increases share in several major puxitict at twojoint venturesin Korea that areas, particularly in computer

,' 4 supply industrial, air mnditioning m 99 m numerical controls for the machine my and appliance motors to k> cal and tool market.

l

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worht mai Lets.

T l

Early in 1988, GE Fanut Auto-GE Stotors also won a major con-4,,

mation Canada was established to i tract from l'ont to enter the expand-7'

)

take advantage of the expanding ing inaiket for small automotive i

O Canadian maiket. Another signifi-motors. These motors, initially for j H;

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cant achievement was Ihe prmhict j

W applications, may later be used Ior l {.

climate (ontrol atul engine cooling branding agreement with Combus-i

~'

tion Engineering, a majw supplier l

power windows aixl wiixlscicen sys-g to the pro (ess indust ries.

tems.They will he pnxtuced in a j-( l.

new 50'50 joint venture with Robert

.f) 1 Prosch of West Gennany.

Uniw Pacific has the world' largest fleet of s

GE's Dash 8 locomotives,indudmq tInse units in the North Plattv, n',.b., nn1rsed yard.

I l

16 i

i 1

i

Other Operations GEintomationalpromotes the g

global competitiveness of GE's 14 f

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'g

+j key businesses.

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Americas, the GE Intemational i

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i organization achieved significant advances during 1988in its primary y

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g ing globalalliances, supporting 4g f

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s major project sales, increasing the 7

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deployment ofglobalresources and

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1987 began to yield realbenefits n.

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l988.The integration of CGR into in Europe, at is taking action now through acquisitions, oitiances and business n'en eiopment to GE hiedical Systems was completed, capitatire on maior opportunities inherentin the 1992 opening of markets within the European creating a strong European pres.

Canonity which hasits headquarters (above)in Brussels, Belgium.

ence for this important global busi-ness.The alliance of GE Elecuical 1988.This was led by GE's aircraft working with GE businessesin the Distribution and Control with Fuj engine, medical systems, power sys-United States to identify opportun.

Electric hasled to the poolingof tems, materials and aerospace buri.

ities for more effective integration sales and marketing activities in the nesses. Significant increases were of resources and activities on both htiddle East and Southeast Asia.

recorded in Europe, Japan, the hiid-sides of the border.

in addition, GE Motors started up die East, Southern Asia and the GE Supplysells over $1.1 billion itsjoint ventures with Hyundaiand Asia-Pacific region.

ofelectricalproducts from GE and Daewoo in Korea, and it agreed to To support this growth of world-other companies to commercial, form ajoint venture with Robert wide activity, GE continues to invest construction, industrial and Bosch of West Germany to mab in recruiting, training and deploy-utility customers.

automotive motors in Tennessee.

ing people from many countries.

In 1988,GE Supply began GE Lighting began operating two

%ith the increasing impact of Euro-nnovative rnarketing, sales and dis-joint ventures with a Korean part.

peanintegration and the opening tribution programs to help the ner and announced an alliance with up of markets in the Soviet Union, hhiba ofJapan.GE also reached India and China, GE is committed Company'sindustrialand lighting l

businesses grow in targeted mar-agreement with the Spanish govern.

to staymg ahead m theincreasingly kets. It supports other GE busi-ment on terms fora majorinvest.

compeutive global arena, nesses by being a distributor of ment to manufacture plastic GE Canadais oneof the top 60 specialized spare parts to domestic materials in Spain.

companies in Canada and GE's and international customers.

In early 1989,GE and GEC of the largest intemational operation. In Ladd Petroleum Corporation was United Kingdom reached agree-1988,it had earnings (in Canadian ments, subh ct to requisite govern-dollars)of $75 million on sales of able to maintain its reserves posi-ment reviews, on a broad set of

$1.6 billion.

tion in 1988 despite continued vola-tility in oil and gas prices.

alliances in appliances, medical sys-About $276 million of those sales One of the nation's 10 largest tems, electrical controls and, poten-were for export from Canada. Over independem (non-major)oiland tially, gas turbines. GE Aircraft the past few years, GE Canada has Engines had proiomly teamed up changed its market mix and manu-gas producers, bdd provides a

)

with GEC-Ruston on helicopter facturing operations to emphasize potential backup supply of petro-chemicalfeedstock for GE Plastics engines and on a new small-aircmft new growth opportunities overseas engine.

as well as in Canada.

and its newly acquired Borg Warner There also was major progress in In addition, the ratification of businesses. It also supplies over 50%

incwasingimernationalorders in the U.SlCanada Free Trade Agree-of the natural gas used at GE plants in the United States.

ment is expected to open up more opportunities for GE Canada. It is 1

1 17

Board ofDirectOTS (As of February 10,1989) 4 fa 1

A n

H.Brewster Atwater,Jr. Richard T. Baker Lawrence A.Bossidy Charles D. Dickey, Jr.

Lawrence E. Fouraker Chairman of the Board, Consultant to Ernst &

Vice Chairman of the Retired Chairman of the Fellow, John E Kennedy Chief Execuuve Officer Whinney, pubhc account.

Board, Executive Officer Board and Director, School of Government, and Director, General ants, Cleveland, Ohio.

and Director, General Scott Pa ser Company, Harvard University, Mills, Inc., consumer Director since 1977.

Electric Company, Philadel ia, Pa. Director Cambridge, Mass.

foods and restaurants, Fairfield, Cont.. Director since 19 2.

Director since 1981.

Minneapolis, Minn.

since 1984.

Director since 1989.

p s.

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r.-

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Henry L. Hillrnan Fdward E. Hood, Jr.

David C. Jones Robert E. Mercer Gertrude G.Michelson I

Chairman of the Board ViceChairmanof the Retired U.S. Air Force Chairman of the Board Senior Vice President-and Director The Hillman Board, Exwutive Officer General and former Chair-and Director,The External Affairsand Company, diversified and Director, General man of thejoint Chiefs of Goodyear Tire & Rubber Director, R.H. Macy & Co.,

operanons and invest-Electric Company, Staff, Washmgton, D.C.

Company, Akron, Ohio.

Inc., retailers, New York, ments, Pittsburgh, Pa.

Fairfield, Conn. Director Director since 1986.

Director since 1984.

N.Y. Director since 1976.

Director since 1972, since 1980.

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a Lewis T. Preston Frank H.T. Rhodes Andrew C. Sigler William French Smith John F. Welch, Jr.

Chairman of the Board President, Cornell Univer-Chairman of the Board, Senior partner, Gibson, Chairman of the Board, and Director,J.P. Morgan sity, Ithaca, N.Y. Director Chief Executive Officer Dunn & Crutcher, law Chief Executive Officer l

& Co. Incorporated and since 1984.

and Director, Champion firm, Los Angeles, Calif.

and Director, General Morgan Guaranty Trust International Corpora-Director since 1986.

Electric Company, Company, New York, N.Y.

tion, paper and forest Fairfield, Conn.13irector Director since 1976.

products, Stamford, Conn.

since 1980.

Director since 1984.

I8

v The entire GE family was saddened in December by the Committees of the Board

?

passing of Thornton E Bradshaw, a member of the Board Audit committee i,

of Directors since 1986.

Richard T. Baker, Chairman Mr. Bradshaw was chairman of RCA during the early yrenc $"["kasEn

, ae 1980s and successfully led that company through turbu-Barbra Scott Preisket lent times. After the acquisition of RCA by GE, his counsel, Qw;ipegog, wisdom and concern for the people of both companies helped create a smooth, humane and highly successful

["b t ENer*e'r"Cha7 man combination. Mr. Bradshaw's business acumen and leader-g2hn E Welch,Jr., Vice Chairman CharNIIr$i[Lef,, r ship were widely respected, but, for those who knew him, r

H1nry H. Henley, Jr.

the warmth and charm of this decent and wonderful man Hent H. Henle N[ard CINc* fee"uty are what will be most missed, and most remembered.

$*, HEM *,* odes Officer and Director, it Brewster Atwater,Jr., chairman and chief executive Walter B. Wriston i

Cluett, Peabody 8 Co.,

OlFicer of General Mills, Inc., was elected to the Board on Management fe"taji!"*",",f a f*'""""*"

ei February 10,1989.

gvelo megt

)

"d New York N Director The Board held 10 regular meetings in 1988. In addi-committee n

tion, the Directors panicipated on the following commit.

Walter B. Wriston, Chairman gygm tees that aid the Board m. its duties.

Henry H. Henley,jr.

Hent[C. Jones L. Hillman F

The Audit Committee, which includes only Directors from Davic 9i outside GE, held five meetings. This committee reviewed Genmde G. Michelson t~

p y

the activities and independence of GE's public accountants

$,n g committee g y

},

n,n and the activities of the Company's intemal audit staff. Its Henry H. Henie, r M

reviews included the Company's financial reporting proc-y;mde Gpe,pfe son i

y ess, mternal financial controls and comphance with key GE Andrew C. Sigler hy. "

policies, including those related to the defense procure-operations committee ment process. It also reviewed the investment portfolio of Henry L. Hillman, Chairman j

GE Financial Services.

'*","y,,I. B*' d '#

g ;c nn s

Bmbara Scott Preiskel The Finance Committee met four times. It examined GE's H.Brewster Atwater,Jr.

Attorney, New York, N.Y.

financial position, pension funding and trust operations, Robert E. Mercer Barbara Scott Preiskel Drector since 1982.

foreign investments, financing commitments with the air-txwis T. Prestca line industry and ether matters involving large-scale utili-h';fi;,, S,$ Smith lre" zation of Company funds.

Public Responsibilities The Management Development and Comperaation Commit-committee tee, which includes only Directors from outside GE, held Hent H. Henlev, r., Chairman 11 meetings. In addition to approving changes in GE's N,h"Bre ster A'tw te

'hJ i

7 7

management, it reviewed the Company's exempt salary Richard T. Baker

(

h structure and executive compensation programs.

f[e*nry" u ker il n The Nominating Committee, which held three meetings, Gertrude G. Michelson M

s

'",4,

reviewed candidates for the Board and recommended the B*jr[w"Nig$r 'k i

g committee structure and membership for the ensuing year.

William French Smith f

The Operations Committee met five times, includingjoint Technology and l

sessions with the Audit, Finance, and Technology and Sci, science committee Frank H.T. Rhodes, Chairman ence Committees. It reviewed the Company's operating Edward E. Hood,Jr.,

j i

results and plans as well as the activities of GE Medical Vice Chairman l

Systems and Corporate Research and Development.

$*I *c E birN[c?h'a arj y The Public Resporuibilities Committee, at its two meetings, D 0r ren ua r II tillman the Board and Director, reviewed the activities of the General Electric Foundations Robert E. Mercer N,7,*"$tib k,

and evaluated environmental issues that could affect GE.

Director since 1962 '

The 7'echnology and Science Coramitter held two meetings, bothjoint sessions with the Operations Committee. Its l

activities included reviews of GE Lighting and NBC.

i i

19

ManagemenI (As of Pehruary io. i989)

Corporate Executive Officers Senior Corporate Officers Corporate Staff Officers John F. Welch, Jr.

.g-

~

Nigel D.T. Andrews Chairman of the Board and

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Vice Pred.ient. Business Chief Executive Ofhccr gl }

Development and Planning James J. Costello Lawrence A. Bossidy Yi-S

~

Vice President and Comptroller Vice Chairman of the Board i% 7 -

and Executive Officer Dale F. Frey i

Edward E. Hood, Jr.

~

Vice President and Treasurer; and Executive Officer L

Chairman and President, Vice Chairman of the Board General Electric Investment James R. Bunt g

Corporation Vice President Joseph Handros Dennis D. Dammerman Jack O. Peif for Vice President and Deputy Senior Vice President, Senior Vice President, GeneralCounsel Finance Executive Management Joyce Hergenhan Vice President, Public Relations y.y. y n err, myp up -

Philip A.Lacovara 4

Vice President and Senior 4

g.

Counsel, Litigation and

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J Legal Policy t

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- t Teresa M. LeGrand u

Vice President, Audit Staff g

y;,

Phillips S. Peter a

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Vice President, Government Relations Arthur V. Puccini Frank P. Doyle Walter L. Robb Vice President, Employee s

Senior Vice President, Senior Vice President, Relations Relations Research and Development John M. Samuels xecu e cc Pr ident Vice President and Senior Counsel, Tax Policy and It' '

git

• Planning

( '(i Edward J. Skiko i '

Vice President,information Technology A

. i Benjamin W. Heineman, Jr.

Senior Vice President, General Counsel and Secretary l

20

Operating Management (As er restuary io.1989)

Financial Services Plastics Medical Systems Aircraft Engines I

I Gary C.Wendt Glen H. Hiner John M.Trani Brian H. Rowe President and Chief Operating Senior Vice President, Senior Vice President, Senior Vice President, Officer, General Electnc GE Plastics GE Medical Systems GE Aircraft Engines Financial Services, Inc.;

Robert H. Brust James G. Del Mauro Brian Brimelow fff er r i bectric ce President, Finance Vice President, Service

\\ c President, Government Capital Corporation (GECC)

Paul L. Dawson Thomas E. Dunham ucts Vice President, GE Plastics-Vice President, Manufacturing Sam Dolfi Americas

io ce Pres dent, Vincenzo Morelli Vice President,iluman Finance Edward R. Koscher President and Chief Executive Resources Burton J Kloster,Jr Vcc President, Sales Officer, General Electnc-Lee Kapor Senior Vi[e President, beneral William H. Westendorf gi #$ c#$tio s Counsel and Secretary Vice President, Manufacturing Charles P. Pieper Edward C. Bavaria I

Michael A President and Chief Executive Executive \\,. Carpe,nter Joseph G. Wirth Officer, GE Medical Systems-Vice President, Airline ice President,G,ECC:

Vice President. Technology Asia Ltd.

Marketing President and Chief Executive P, ice President, GE Sih.

hih.p M, Gross Steven C. Riedel W. George Krall Officer, Kidder, Peabody Group

\\

cones Inc.

Vice President, Marketing Vice President, Production Dennis J. Carey Herbert G. Rammrath Robert L. Stocking James A.Parke GE Plastics-Senior Vice President,

1. "'j V ce President, Sales Vice President, Finance t-GECC Corporate Finance and Business Development Charles V. Sheehan Joseph M. Sakach, Jr..

NBC Senior Vice President Chairman and Chief Executive Frank E. Pickering Vice President, Engineering Kidder, Peabody Finance and Administration sti 'B.

T'5MN Robert C.Turnbull James H. Ozanne

.% Donal,d Simpson n

Vice President, Military Engine Operations Executive Vice President, GECC sce President, Manufacturing 4

ascher b

Silas S. Cathcart

\\qweS

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Lighting ice President, Product Chairman, Kidder, Peabody c

Group Inc.

Management and Marketing Michael G. Fitt YI Chairman, President and Chief

% :J Executive Officer, Employers

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Reinsurance Corporauon Robert C. Wright

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President and Chief Executive Of0cer, National Broadcasting

>. >i Company, Inc.

g,N j Albert F. Barber Executive Vice President I&

Michael G. Gartner John D. Opio President, NBC News Senior Vice President, Albert D. Jerome GE Lighting President NBCTelevision William S. Frego Stations Vice President, Marketing Edward L. Scanlon and Sales Executive Vice President Robert P. Mozgalu Brandon R.Tartikof f Vice President, Production President, NBC Stephen Rabinowitz l

Entertainment and Vice Picsident, Technology NBC Productions Raymond J. Timothy Group Executive Vice President 2I

Operating Management < Continued >

Industrial and Electrical Distribution and Power Systems Aerospace Control Canada / Latin America i4 i

y Gary L Rogers William R.C. Blundell

~

Vice President, GE Electrical Chairman and Chief Executive i

Distribution and Control Officer,GE Canada g

s n.

David M. Engelman Robert T.E. Gillespie

%f,

(

g Vice President, Sales Executive Vice President Motors GE Supply Stephen J. O'Brien J. Richard Stonestfor Vice President, GE Motors Vice President,GE Supply s

Roger D. Morey Vice President, Sales Ladd Petroleum John A.Urquhart John D. Rlttenhouse Senior Vice President, Senior Vice President, Ronald G. Spence GE Industrialand Power GE Aerospace Transportation Systems President and Chief Executive Officer, Ladd Petroleum Systems James B. Feller Michael D. Lockhart David C. Genever-Watling Vice President, Aerospace Vice President, Corporation Vice President, GE Power Technology GE Transportation Systems Generation Jack A.Frohbiete, Aerospace Techriology Russell L Noll,Jr.

Vice President, Government Factory Automation Thomas E. Cooper Vice President, Production Electronic Systems Robert P. Collins Vice President, Aerospace Eugene J. Kovarik Arthur L. Glenn President and Chief Executive Technology Vice President, GE Power Vice President, Defense Officer, GE Fanuc Automation Delivery and Control Systems North America,Inc.

Environmental Programs JoelTenrer Raymond P. Kurlak W. Roger Strelow Vice President, GE Drive Vice President, International Vice President, Environmental Systems Communications and Programs Desbert L. Williamson Strategic Systems

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f Vice President, GE Industry and Charles A.Schmicn Licensing / Trading Utility Sales Vice Preudent, Astro-Spac g

p Wolfe Robert G. Stiber Bertram, dent, GE Nudear

f. I President and Chief Executive

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bi Officer, GE and RCA Licensing Vice Presi Vice President, Aircraft

-y Energy Electronics yg4:

Mana ementO ration, Inc.,

Robert W.Tieken andG Tradin Company Appliances Vice President Finance and N

Information Technology y'

Marketing and Sales d

Clyde D. Keaton Ser i es Paolo Fresco Vice President, Marketing and Sales Senior Vice Pre > dent, Albert J. Febbo

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GE International Vice President, Automotive 0

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Alberto F. Cerruti industry Marketing and Sales

'um Vice President, Finance Henry J. Singer i

),

y and Business Support Vice President, Area Management and Sales Alistair C. Stewart

(.g Vice President, Middle East, Africa and South Asia Roger W. Schipke

~

L Thornas W. Tucker b_ '

Vice President, Asia Pacific Senior Vice President, GE Appliances

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Nchard L Burke Vice President, Technology, Eugene F. Murphy Pr oduct Design and Senior Vice President, Manufacturing GE Communications and Gerald R. Cott.

Scrvices Vice President, GE Consumer W. James McNeeney, Jr.

I Service President, GE information Bruce A. Ender, Services Vice President, Marketing 2r

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Audited financialstatements s

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tinancial stateinents : +- ~ 4n

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3 23

O Statement ofEarnings GeneralElectric Company and consolidated affiliates For the years ended December 31 (In rnillions) 1988 1987 1986 Revenues

. Sales of goods

$28,955

$29,937

$28,139 Sales of services 9,840 9,370 7,0S7 Otherincome(note 4) 675 655 1,016 Earnings of GEFS GEFS carned income from operations (note 5) 30,621 8,196 5,963 ElTect of change in tax-rate assumptions for leveraged leases (note 5)

(172)

Totalrevenues 50,089 43,158 42,013 Coets and expenses (note 6)

Cost of gocxis sold 21,155 22,359 20,707 Cost ofservices sold 7,676 7,290 5,425 Interest and other financial charges (note 8) 4,817 3,912 2,679 Insurance policy holder losses and benefits 1,501 1,560 1 439 Pmvlion for losses on financing receivables (note 9) 434 290 553 O*her costs and expenses 9,724 8,406 7,760 Unusual expenses, including provisions for business 1,118 311 restructuring (note 10)

Minority interest in net earnings (loss) of consolidated affiliates 61 (4) 7 Totalcosts and expenses 45,368 44,931 38,886 Earnings (loes) before income taxes, extraordinary item and cumuletive effect of accounting changes 4,721 3,227 3,127 (Provision) credit for income taxes (note 11)

(1,335)

(1,108)

(1,027)

Effect of change in tax-rate assumptions for leveraged leases (note 5) 392 Eamings before extraordinary item and cumulative effect of accounting changes 3,386 2,119 2,492 Extraordinaryitem (note 26)

(62)

Cumulative effect toJanuary 1.1987 of accounting changes initial applicatie;. of Statement of Financial Accounting Standards No. 96 " Accounting for income Taxes"(note 1) 577 Change in overhead recorried in inventory (note 1) 281 Not osmings

$ S,386

$ 2,915

$_2,492 Not eamings per share (in dollars)

Before extraordinary item atx! cumulative efTect of accountingchanges

$ 3.75

$ 2.33

$ 2.73 Extraordinaryitem(note 26)

(.07)

Cumulative effect toJanuary 1,1987 of accounting changes Initial application of Statement of Financial Accounting Starxiards No.96

" Accounting forincomeTaxes"(note 1)

.63 Change in overhead recorded in inventory (note 1)

.31 Not samhgs pershare

$ S.75

$ 3.20

$ 2.73 Dividends declared per share (in dollars)

$ 1.46

$ 1.32 %

$ 1.18 %

'Ihe notes to consolidated financial statements on pages 4440 are an integral part of this statement.

. 24

{

GE GEFS 1988 1987.

1986 1988 1987 1986

$28,958

$29,937

$28,139 9,866 9,378 7,072 680 649 1,010 788 552 504 10,655 8,225 5,986 (172) 40,292 40,516 36,725 10,655 8,225 5,814 21,160 22,359 20,707 7,702 7,298 5,430 669 645 625 4,177' 3,277 2,063 1,501 1,560 1,439 434 290 558 6,250 5,979 5,963 3,484 2,440 1,805 1,027 311 91 i

29 I

(3) 32 (5) 10 I

35,810 37,309 33,033 9,628 7,653 5,875 4,482 3,207 3,692 1,027 572 (61)

(1,096)

(1,088)

(1,200)

(239)

(20) 173 392 3,386 2,119 2,492 788 552 504 (62)

(62) 577 518 281

$ 3,386

$ 2,915

$ 2,492 788

$ 1,008 504 in the supplemental consolidating data on this page,"GE" means the former basis of consolidauon as described in note i to the consolidated financial statements: "GEFS" means General Electric Financial Services, Inc. and ell of its affiliates and associated companies. Transactions letween GE and GEFS have tren eliminated from the " General Electric Company and consolidated affihates" columns on the pteceding page. Eliminations are shown on page 45.

25

Statement ofFinancialPosition General Electric Onnpany and consolidated af filiates At !ksember 31 On millions) 1988 1987 Assets Cash (note 12)

$ 2,187

$ 2,543 Mar ketable securities carried at cost (note 13) 5,779 5,353 Maiketable securities carried at market (note 14) 5,089 4,000 Securities purchased under agreements to resell 13,811 12,889 Cuneut receivables (note 15) 6,780 6,745 Inventories (note 16) 6,486 6,265 GEFS financing receivables (imestment in time sales, loans arxl financing lease;)- net (note 17) 35,832 27,839 Other GEFS receivables (note 18) 4,699 4,458 Piuperty, plant aixl equipment (including equipment leased to others)- net (note 19) 13,611 12,973 Investment in gel'S Intangible assets (note 20) 8,552 5,748 All other assets (note 21) 8,039 6,601 Total assets

$110,865

$ 95,414 Liabilities and equity Short-term lxmuwings (note 22)

$ 30,422

$ 23,873 Accounts payable (note 23) 6,004 5,728 Securities sold under agreements to repurchase 13,864 13,187 Securities sold but not yet purchased, at market (note 24) 2,088 1,407 Progress colkctions and price adjustments accrtml 3,504 3,760 Divideixls payable 369 319 All other GE current costs ami expenses accrued (note 25) 5,549 4,867 long-term lx>rrowings (note 26) 15,082 12,517 Reserves ofinsurance afliliates 4,177 3,549 l

All other liabilities (note 27) 6,986 6,325 Deferred income taxes 3,373 3,100

'li>talliabilities 91,418.

78,632 Minority interest in equity of consolidated affiliates (note 28) 981 302 Onnmon stock (926,564,000 shares issued) 584 584 Other capital 823 878 Retained earnings 17,950 15,878 less conunon stock held in treasury (891)

(860)

'li>tal share owners' equity (notes 29 and 30) 18,466 16,480 Totalliabilities and equity

$110,865

$ 95.414 Onnmitments and contingent liabilities (note 31)

The notes to mmolidated financial statements on pages 44-70 air an integral part of this statement.

2ti

.. e 1

j.

GE GEFS 1988 1987' 1988 1987

$' I,554

$ 1,834 633 709 349 858 5,430 4,495 5,089 4,000 13,811 12,889 L

7,110 6,782 6,486 6,265 1

i' 35,939 27,931 4,806 4,641 9,360 9,255 4,251 3,718 4,819 3,980 l

6,984 4,430 1,568' 1,318 4,621 4,896 3,418 1,705 i

$ 41,283

$ 38,300

$ 74,945

$ 61,406

$ 1,861

$ 1,110

$ 28,731

$ 22,848 2,136 2,615 4,132 3,329 13,864

.I3,187 2,088 1,407-3,504 3,760 369 319 l

5,549 4,867 4,330 4,491 10,862 8,037 4,177 3,549 5,481 5,088 1,505 1,237 (641)

(620) 4,014 3,720 22,589 21,630 69,373 57,314

_228 190 753 112 584 584 I

.1 823 878 1,379 1,328 17,950 15,878 3,439 2,651 (891)

(860) l 18,466 16,480 4,819 3,980

$ 41,283

$ 38,300

$ 74,945

$ 61,406 l

In the supplemental umsolidating data on this pge,"GE" means the fornwr basis l.

of omsohdation an described in note 1 io the omsolidated hnancial statements:

"G E FS" means General Electric Financial Sen ic es, Inc. and all ofits af filiates and associated companies. Transactions hetween GE and GEFS have la e n eliminated Irom the " General Electric Gompany and consolidated affdiates" columns on the premling page. Eliminations are shown on page 45.

27_

_ _ - _ _ _ _ _ _ _ _ _ _. _ _ ~

e Statement ofCash Flows General Electric Company and consolidated affiliates I

ior the yean ended Demnier 31 On inills.nq 1988 1987 1986 Cash flows from operating activities Net earnings

$ 3,386

$ 2,915

$ 2,492 Adjustments to reconcile net earnings to cash provided from operating activities Extraordinary item arxl cumulative effect of changes in j

accounting principles (796) l Depreciation, depletion atx1 amortization 2,266 1,913 1,825 Earnings retained by GEFS Defen ed income taxes 124 37 103 Deci case (increase) in G E cnn ent receivables 123 138 624 Decrease (increase) in GE inventories (209) 375 (317) lucrease in insurance reserves 315 669 852 Provision for losses on financing receivables 434 290 558 Net ( hange in certain hmker-dealer accounts (573)

(103)

(1,298)

All other operating activities 1,236 401 1,124 Cash provided from operating activities 7,102 5,839 5,963 l

Cash flows from investing activities j

i Property, plant aix! equipnv:nt including equipment leased to i

others

- additions (3,681)

(2,277)

(2,806) l

- dis [x>sitions 470 890 691 Nct increase in GEFS financing icreivables (6,057)

(4,575)

(4,203)

Payments for principal businesses purchased, net of cash acquired (3,504)

(555)

(6,730)

Pn x ceds from principal husiness dispositions 880 646 1,386 All other investing activities (1,772)

(1,084)

(1,821)

Cash used for investing actisities (13,664)

(6.955)

(13,480)

Cash flows from financing activities j

Net c hange in Ix>rnnvings (less than 90-day maturities) 3,868 2,519 4,536 1

Debt having maturities more than 90 days

- newly issued 11,324 8,219 9,576

- repayments anxi other reductions (8,801)

(6,883)

(6,214)

Sale of preferred stock by GECC 600 Disix>sition of GE shares from treasury 356 361 283 Pun base of GE shares for treasury (387)

(846)

(348)

Dividerxis paid to GE share ownets (1,263)

(1,177)

(1,058)

Cash provided from (used for) financing activities 5,697 2,193 6,775 l

Total cash flows -increase (decrease) in cash and equivalents

$ (865)

S 1,077

$ (742)

The notes to consolklated hn,uwial statenients on pages 4140 are an inirgial part ul this statenent.

I 28

r n

g GE GE15 1988 1987 1986 1988 1987 1986

$ 3,386

$ 2,915

. $ 2,492

$ 788

$ 1,008-

$ 504 (796)

(456) 1,522 1,544 1,466 744 369 365 (788)

(55P)

(504)

(215)

(156)

(158) 339 195 250 (170) i11 629 (209) 375 (317) 315 669 852 434 290 558 (573)

(103)

(1,298) 98 434 226 1,444 207 421 3,624 3,873 3,828 3,49.1 2,179 1,652 (1,884)

(1,698)

(2,042)

(1,797)

(579)

. -(764) 118 410 275 352 480 419.

(5,943)

(4,627)

(3,779)

(2,963)

(6,II0)

(541)

(555)

'(620) 880 646 1,367 19 292 7

(120)

(2,007)

(1,282)

(1,617)

(3,557)

(635)

(6.630)

(9,936)

(6,563)

(6.342)

(466)

(961) 466 4,249 3,515 4,039 934 396 3,387 10,291 7,818 6,195 (30)

(238)

(566)

(8,771)

(6,fAS)

(5,648) 600 356 361 283 (387)

(846)

(348)

(1,263)

(1,177)

(1,058)

(856)

(2,465) 2,164 6,369 4,688 4,586

$ (789)

$ 773

$ (638)

(76)

$ 304

$ (104) in the supplemental consolidating data on this page,"GE" means the former basis of consolidation as described in note I to the consolidated financial statements "GEFS" means General Electric Financial Services, Inc. and all of its affdiates and associated companies. Transactions letween GE and GEFS have been eliminated from the " General Electric Company and consolidated afhhates" columns on the preceding page. Eliminations are shown on page 45.

l l

1 1

29 j

Management.'s Discussion ofEarnings I

Overview The consolidated Statement of Earnings (page 24) shows For the first time, General Electric Company's consolidated that revenues were $50.1 billion in 1988 compared with j

financial staternents indude the detailed effects of adding

$48.2 billion in 1987 and $42.0 billion in 1986.These ain unts are restated because of the change in consolida-(

to the Company's manufacturing anxl industrial senices businesses the accounts of General Electric Financial Sen,.

tion method. The principal components of consolidatal ices, Inc. (GEFS). The reason for the required change is revenues are " sales Quxis and seMcesW M aM

" earned income" of GEFS.

discussed in note I to the consolidated financial r.,

ments. Among other things, that note also explams now

• GE sales fi>r 1988 were $38.8 billion,1% less than the l

the terms "G E" or "GE except G EFS" arul "GEFS" are used year beforeJFotal volume of shipments in 1988 war down in this re[x>rt to help readers uixierstarxi he various data, atx>ut 2%, but the effect was partly offset by higher prices t

These tenus are used frequently in this hf anagement in some markets. If sales fi>r the two perimis were adjustal Discussion fi>r clarification or emphasis.

for business dis}x>sitions (which were only partly offset by sales dded by acquisitions), GE's sales for 1988 would j

Consolidated net earnings fi>r 1988 were $3.386 billion, or 16% more than for 1987. Net earnings were not affe ted ham tren up 4% yeaino-year. Sales m 1987 were 12%

umre than m 1986, ma,mly because ofinclus, ion m 1987 of by the change in methmi of consolidation. This was the Company's second consecutive year of strong double-digit a full ye r fopeiutions fi>r businesses acquired from RCA, wher eas 1986 sales had included RCA opeintions earnings growth. hiost businesses contributed to the better earnings. Pnxtuctisity gains in GE operations were perva-only fawn m nths.

sive, aix! GE Plastics and GE hiedical Systems had excel.

• GE's other income for 1988 was slightly alx>ve 1987 lent increases in revenues anxi operating profit. GEFS had fi>llowing a sharp decrease from 1986. Principal reasons much higher earnings. Consolida:ed operating profit and for the 1987 decrease were lower income from short-term carnings improved despite a sharp reduction in GE Appli-investments, which had built up in 1986 preparatory to the ances' profitability because of significantly higher warranty acquisition of RCA, and lower gains from sales ofToshiba expense fi>r certain refrigerator compressors. See "indus-Cor}xnntion stock. Details of GE's other income are in try segments" beginning on page 32 fi>r additional detail note 4.

about performance by various businesses of the Company.

• GEFS' carned income from operations fi>r 1988 was Net earnings fi>r 1988 did not include any provisions for

$10.7 billion, up 30% from 198""s $8.2 billion, which was business restructuring expenses, nor did they include any 37% more than the $6.0 billion for 1986. The principal impact from accounting changes. Net earnings in 1987 reason for these increases has been higher levels of earning were 17% atxive 1986, also as a result of solid operating assets in financing businesses plus increases in premium perfonnance. However, analysis of 1987 results was com-and investment income of insur;mce affiliates. Yicids plicatal by two types of transactions that essentially (i.e., prices or interest rates paid to GEFS by its customers I

equaled each other in net earnings. These were a reduc-fi>r its financing of their needs) were up in 1988 fiAlowing i

tion in pre-tax aixi after-tax car nings caused by unusual declines in 1987 aixl 1986. Note 5 presents details.

and extraordinary expenses ($747 million after taxes),

• GE's cost of gmxis and senices sold and its selling, mainly fhr business restructuring to improve future prof-general and administrative expenses totaled $35.1 billion l

itability; and an increase in after-tax earnings ($720 mil-tion) from two accounting changes, one involving income taxes and the other involving overhead recorded in inven-tories,as explainn!in note 1.

• " ' " " " " *"**9" Y

l Retum on average share owners' equity of 19.4% in i

l 1988 improved almost one full point from 1987's 18.59, go og which also was much better than that Ihr 1986-17.39.

Share owners' equity is not affected by the new consoli-17.5 dation methixl.

915J) 12.5 1<

" 10.0 I

?

v 0

1984 1985 1986 -1987 1988 30

in 1988, equal to 90.4% of sales. Excludmg the abnormally GE employee productivity high refrigerator annpressot wammty expense provisions (Constant dollar sales per GE employee; in thousands) in 1988, the ratio of costs to sales wouki have been 89.3%.

$140 Comparable cost and expense ratios to sales for 1987 arul 1986 were 90.6% arul 91.2(7c, respectively. An imjxntant 125 factor in these improvul aret/ sales relationships has tren 110 steadily improving pnxtuctivity thr the last five years as de-picted in the chart on this page 'Ihere were ine corJx> rate-1 93 level business restructuring expense provisions in 1988 to compare with the $1.0 billion provided in 1987 and the 80

$311 million in 1986. Over the five years ended in 1987, GE's unusual business restructuring expenses, the major 0

objective of which has been to improve cost :.tructures, 1984 1985 1986 1987 1988 aggregated about $2.6 billion. The impact on any one yeat's net earnings from business restructuring provisions e.the consolidated effective income tax rate was was essentially equaled by gains from sales of businesses 28.3% m. 1988 compared w. h 34.3%. 1987 and 20.3%.m it m

that do not fit the G.unpany's long-term growth strategy and also, m. 1P87, by the effect of. he income tax and 1986. (The U.S. federal statutory rate was 34% f.or 1988, t

inventory accounting changes.

40% for 1987 and 46% for 1986.) Although ihe decrease m the U.S. fideral statutory rate was the main reason for e GEFS' principal cost is interesi expense, which totaled the lower effi ctive consolidated rate in 1988, there are

$4.2 billion in 1988, a 279 increase fnnn 1987, which was numerous reasons fbr differences between the statutory up 59% from 1986. The increased interest expense and effective rate. Together with other infbnnation about rellects tlye higher level of bonuwings th it have been used inconx tax provisions, an analysis of the differences I

to mvest m canung assets mvolved m a wide variety of between the U.S. federal statutory rate and the consoli-l financings made available to third parties. The comixwite dated rate can be Ibund in note 11, I

interest rate incurred for GEFS' finance activities was 8.39% in 1988 compared with 8.119 in 1987 and 8.49%

• Dm..dends daland tota;ed $1.314 bilh.on m 1988,or S 6 pushan At thmanie time, the Company retamed in 1986. The " spread,"or difference between interest rates GEFS pays to its lenders and rates it charges to its c ent earn ngs to supIxnt enhanced pnxluctive capa-1 su customers, increased somewhat in 1988 after narrowing in bihty and to provide adequate financial resources for the two previous years. Among GEFS' other costs, the pro-intanal and extenial gnuppixn tunities. The fburth-vision for losses on financing receivables of $434 million quarter increase of 17% m dmdends declared marked the j

was up $144 million in 1988. At year-end 1988,GEFS, 13th consecutive year of dmdend growth.

resetic coverage was equal to 2.63% of financing receiv-l ables, up from 2.599 at year-ends 1987 atul 1986. The receivable loss providen of $558 million in 1986 was higher than normal because of energy.t elated write-offs.

l

• Although relatisely small, the inerest of minority owners in the equity of consolidated affiliates was much higher for lxnh GE and GEFS in 1988 than in previous

> cars. For GE, the increase was due mainly to the impact of the Company's recent aggressive ibrmation ofjoint ven-j tures and alliances aimed at inct easing global competitive-ness.1br GEFS, the ina case was principally the result of 1

GECC's selling variable mte preferred sto( k to third par.

i ties to augment the equity base.

31

industry segments increased deliveries to commercial customers. The strong industry segment revenues and operating profit Ihr the v lume growth in years before 1988 resulted in higher last five years appear on the op;msite page The presenta-perating profits. The opertting profit of $ 1.0 bilhon m 1988 was about 1% below the 1987 level when $72 million tion of consolidated industry segments is in two parts, one lbr GE except GEFS and one fbr GEFS. Consistent with of business restructuring expense is excluded from that

- prior yean,. GE revenues and operating profit continue to year.This relatively gmxl (considering the icvenues

' nclude earnings of GEFS. Revenues and operating profit decline) operating pmfit performance was the resuh of j

i tor GEFS by the itxtustry segments in which it conducts productivity improvements. New orders of $9.7 billion

{

business are presented separatel) with appropriate elimi, received during 1988 were up 18%, and the backlog of unfilled orden at December 31,1988 was $12.4 billion, of nation of GEFS' earnings as well as the minor effect of which almut 40% is scheduled Ihr corr pletion in 1989.

i transactions letween GE and GEFS segments.

Consumer Pnxiucts is no longer shown as a separate GE

• Broadcasting revenuesincreased 12% in 1988, f

industry segment inasi.mch as the largest contributor to mainly because of NBC's coverage of the Summer Olym-revenues in that segment (the consumer electronics busi-pic Games. Operating pmfits were up 8% from 1987. The ness) was sold at the end of 1987. Consumer electronics smaller relative increase in operating pmfit reflected the results (br prior years are now included in All Other, and cost impact and lost advertising volume fmm coverage of j

the GE Lighting business is now included in the Industrial the two major ;mlitical conventions. Profitability in 1988 j

segment. Additional financial data as well as a detailed from network opert.tions was flat, but TV station profit-1 description of each segment can be found in note 33.

ability improved. The c(nnparison of 1987 and 1986 reve-nues anxi operating pmfit (both of which increased sub-Consolidated operating profit is the principal source of GE's net earnings, anxl the relationship between the two st nti lly in 1987)icllected inclusion of a full year of NBC in GE results in 1987 versus only seven months in 1986.

j fbr the last five years is depicted in the chart on this page.

Consolidated operating profit was $5.9 billion in 1988, up e Industrial revenues were 6% more in 1988 than in i

fmm $4.5 billion in 1987 anx1 $3.7 billion in 1986. Operat.

1987, which was 2% below 1986. When reviewing trends ing profit in 1987 was after absorbing $1.069 billion of in operating profit,it should be recalled that 1987 anxl unusual expenses ($285 million in 1986), mainly fbr busi.

1986 results were depressed by business restructuring l

ness restructuring to imprm e long-range competitiveness.

expense provisions ($326 million in 1987 and $95 million l

There were no similar unusual expenses in 1988. Com.

in 1986). Adjusting fbr the 1987 restructuring expenses, l

ments on each segment Ibliow.

operating pmfit in 1988 was up 27%. (Adjusting 1987 arvi e Aerospace revenues in 1988 were essentially 1986 for business restructuring expense pnnisions, seg-unchanged fnnn 1987. liigher revenues in 1987 com-nwnt cperating profit in 1987 was 6% less than in 1986.)

paral with 1986 resulted from including RCA for a full The 1988 operating pmfit increase was led by GE Light-year in 1987 phn other volume increases. Operating pmfit ing, which had much-improved margins on modestly in 1988 also was essentially unchanged after adjusting (br higher revenues. GE Transportation Systems had a goal 1987's restmeturing expense ($31 million). That restruc-increase in operating profit and revenues, and GE Motors l

nd GE Electric;d Distribution and Control had better turing expense more than accounted ior 1987's slight decrease fmm 1986. New orden of $5.6 billion received margins on nxxlest revenues increases.

during 1988 were up 13%, and the backlog of unfilled orders at December 31,1988 was $7.1 billion, of which approximately 50% is schedukxl (br c(nnpletion in 1989.

Consolidated operating profit and net earnings e Aircraft Engines revenues were 4% lower.m 1988 (in billions) after a number of years of strong increases. The 1988 56.0 decline came fmm the effect oflower shipment schedules for military engines that was only partially offset by 4.8 i

m-s.c i

0 m Net camings 1984 1985 1986 1987 1988 32

)

Summary ofIndustry Segments l

' General Electric Company and consolidated affiliates i

lor the years ended December 31 (In ini!! ions) 1988 1987 1986 1985 1984 Revenues GE I

Aerospace

$ 5,3 l3 -

$ 5.262

$ 4,318

$ 3,085

$ 2,622 Aircntft Engines 6,481 6,773 5,977 4,712 3,835 y

llroadcasting 3,638 3,241 1,888 51 104 Irxiustrial 7,061 6,662 6,770 6,946 '

. 6,648 '

hiajor Appliances 5,289 4,721 4,352 3,617 3,650 hlaterials

. 3,539 2,751 2,331' 2,119 2,280

)

Ibwer Systems 4,805 4,995 5,262 5,824 6,289

'li chnical Pnxtucts arxl Services 4,431 3,670

- 3,021 2,317 2,402 Earnings of GEFS 788 552 504 413 329 L

AllOther 394 3,176 3,379 1,071 1,762 Cor[x> rate items and Eliminations (1,477) -

(1,287)

(1,077)

(903)

(990)

I "li>tal GE 40,292 40,516 36,725 29,252 28,931

-l GEFS Financing 5,827 3,507 ~

2,594 2,469 2,093 Insurance 2,469 2,206 2,017 1,329

. 831 Securities llroker-Dealer 2,316 2,491 1,176 AllOther 43 21 27 7

9 TotalGEFS 10,655 8,225 5,814 3,805 2,933 -

Eliminations (858)

(583)-

(526)

(433)

(422)

Consolidated revenues

$50,089

$48,158

$42,013 '

$32,624

$31,442 Operating profit GE Aerospace

$ 640 603

$ 608

$ 437 332 Aircraft Engines 1,000 940 869 673.

460 l

Ilroadcasting 540 500 240 20 15 Industrial 798 302

-575 658 478 l

Afajor Appliances 61 490 462-399 381 Alaterials 733 507 424 330 446 Power Systems 503 199 354

.740 549 Technical Pnxlucts and Services 484 275 112-22 (8)

Earnings of GEFS 788 552 504 413 329 AllOther 168 72 162 376 797

'li>tal GE 5,715 4,440 4,310 4,068 3,779 GEFS Financing 899 636 (99)'

501 444 Insunmce 325 172 123 45 3

Securities llroker-Dealer 64 (23) 83 AllOther (261)

(213)

(168)

(122)

(93)

'Ibtal GEFS 1,027 572 (61) 424 354 Eliminations (802)

(562)

(513)

(420)

(339)

Consolidated operating profit 5,940 4,450 3,736 4,072 3,794 GE interest and financial charges (net of eliminations)

(655)

(635) '

(616)

(354)

(325)

GE items not traceable to segments (564)

(588) 7 (287)

(175)

Errnings before income taxes, extraordinary item and cumulative effect of changes in accounting principles

$ 4,721

$ 3,227

$ 3,127

$ 3,431

$ 3,294.

The notes to c consolidated financial statements on pages 44-70 are an integral part of this statement. "GE" means the fortner basis of consolidation as descriled in note I to the consolidated financial statenwnts:"GEFS" means General Electric Financial Services, Inr. and all of its affiliates arut assori.ned mmpanies. 0;x rating girofit of GE seginents excludes interest aiul other fmainial charges; operating profit of GEFS incitules the cf fcct of interest and discount, w hit h is the largest element of GEFS' operating msts.

33

• Major Appliances revenues increased 12% from 1987 upturn in 1988, particularly in gas turbine markets. When following an 8% increase from 1986. The 1988 increase companng trends in operating profits, it should be came from higher volume (partly offset by lower prices)in recalled that 1987 and 1986 results were depressed by core appliance lines and from the addition of Roper Cor-business restructuring expense provisions ($264 million in Ix> ration beginning in 1988's second quarter.The sharp 1987 and $173 million in 1986). Adjusting for the 1987 drop in operating profit in 1988 following several years of restructuring expenses, operating profit in 1988 was up gcxxl increases was more than accounted for by abnor-9%. Adjusting 1987 arxl 1986 for business restructuring mally high warranty expense provisions for certain refrig-expense pmvisions, segment operating profit in 1987 was crator compressors. The problem has been corrected in 12% less than in 1986.

cunently manufactured pnxtucts.

• Technical Products and Services revenues increased

• Materials revenues were up 29% in 1988 compared 21% in lx>th 1988 arxl 1987. Operating profit increased with 1987, which was 18% more than 1986. Opemting sharply in lx>th years, even taking into account the profit for 1988 increased 45% from the previous year fol-

$95 million of business restructuring expense in 1987. GE lowing a 20% gain from 1986. These continuing excellent Medical Systems had substantial gains in 1988 revenues performances have been led by strong volume growth in because of the acquisition of European operations (CGR) all plastics pnxlurt lines. This growth also has been accom-at the beginning of the year. Operating profit also panied by better margins. Acquisition of15org-Warner's increased substantially on higher volume in core lines, par-chemicals businesses at the end of the third quarter of ticularly magnetic resonance and service, as well as at CGR.

1988 not only increased volume but added to operating GE Communications and Services had gcxxl margin profit and net earnings after all acquisition costs.

improvements ahhough sevenues were down somewhat e Power Systems revenues were down 4% in 1988-because of the sale of Glolxum early in 1988, the fourth consecutive year oflower revenues. New order o Earnings of GEFS continued to increase in 1988.

rates and backlogs continue to be low by long-term histori-C<nnments on GEFS industry segments appear below. Of cal staixlards although ihere were signs of some potential GEFS' 1988 net earnings, GE Capitafs contribution was

$600 million,28% more than 1987's $470 million, which was 24% alx>ve 1986. (The 1987 amount excludes the cumulative effect of the income tax accounting change arxl extraordinary loss discussed in note 1.)

• Financing operating profits have increased very sub-stantially since 1986. The level of carning assets and the impact of changes in interest rates on lx>rrowing costs and financing yields are important factors in Financing operat-ing profits. Earning assets increased by 30% in 1988 from 1987, which was 29% more than 1986. Financing yields increased in 1988 after declining during 1987. GE Capi-tals composite annualinterest rate increased 43 basis points in 1988. In 1987, the composite annual interest rate i

Earning assets of financing businesses (In billions)

$45 1984 1985 19N6 1987 19H8 l

34 L__

e i

decreased 30 basis [x>ints. The operating kiss in 1986 was U.S. exports to extemal customers the result of that year's dramatic decline in oil prices, which (in billions) resuhed in a substantial charge to reflect impainnent of ss.o values ofcertain energy-related im estinents.

e insurance openiting profit increased sharply in 1988.

40 j

The principal element of the insurance segment is x

g Employers Reinsurance Cor[x; ration, which has increased business volume aixl investment income each year since

,, 2.0-1986. Other insurance operations (which are part of GE a.

l Capital Cor[xnution) also had improved results in 1988 11_.0 i

fiellowing two years of charges reflecting adverse loss y

l expenence.

m84 was m86 ms7 was

• Securities Broker-Dealer (Kidder, Pealxidy) had an operating profit in 1988 fi>llowing a loss in 1987. The improvement in 1988 reflected higherinvestment banking past five years. Export sales by imijor world areas fi>r the revenues, lower operating anxl administrative expenses, past three years are shown below.

and the absence of unusual expense provisions in 1987 li>r business restructuring arni settlement ofinsider trading

["

t988 t987 1986 charges.

e All Other GEFS consists principally of acquisition-h"';j';P" 4

twin 5

related interest expense not alk>cated to the segments.

Middle East and Africa 937 762 490-e GE items not traceable to segments aggregated a loss Americas 531 625 476 of $564 million in 1988 and $588 million in 1987. There OthC'"'C"5 240 238 I24 was a small gain in 1986. This caption includes expenses Total

$4.870 $4,024 $3.709 suc h as the Cor[x>ra;e R&D Center and cor[x> rate staffs and income from cor[xnute treasury activities. In 1987 anxl in addition, exports from GE operations in the United 1988, there was mtu h lower income from c<n porate-level States to GE affiliates offshore were $874 million in 1988, invest ments and nothing comparable to large gains fnnu

$801 million in 1987 and $639 million in 1986.

s;de of'li>shiba stock in 1986.

• GE made a positive contribution >f about $3.1 billion international operations to the U.S. balance of trade in 1988. 'li>tal exports in 1988 e Totalinternationaloperat. ions (consistmg of all were $5.7 billion, including both exports from the United exports fnnn the Um. d States plus the results of offshore States to external customers and to GE alliliates. ImIx>rts te aflik.ates) had revenues of $ 10.8 billion and operating fnnn GE affiliates were $1.0 billion, arul direct imports fnnn external suppliers were $1.6 billion.

I proh.t of $2.1 bilh.on m 1988. Revenues were $9.2 bilh.on and $8.3 billion in 1987 anxl 1986, respectively; arxl operating profit was $1.7 billion in 1987 and $1.3 billion in 1986.

e GE's exports to external customers totaled $4.9 bil-tion in 1988, up fnnn 1987's $4.0 billion. T e chart on this page shows the substantial growth in GE's exports fi>r the l

)

I t

35

Management's Discussion ofFinancial Resources and Liquidity Overview Statement of Financial Position This discussion of financial resources and liquidity focuses e Marketable securities carried at cost fbr GE are cash on the Statement of Financial Position (page 26) arxl the equivalents and are part of GE's near term cash manage-Statement of Cash Flows (page 28). As with the Statement ment process to be discussed in connection with cash flows.

of Earnings, the content of these two statements for GE GEFS' balance consists primarily of debt securities held by anxl GEFS is so different that most of the asset, liability its insurance alIlliates in support of their obligation to arxl cash Ilow categories do not lerxl themselves to simple policy holders.

combination. This, of course, reffects the differences in the e Marketable securities carried at n:arket represent nature of the businesses.

primarily the investing and trading portfblio of Kidde,

Although GE's manufacturing and nonfinancial senices Pealxxly and, to a lesser degree, similar insurance afTiliate activities involve a variety of different businesses, their activities.

urxterlying characteristics are developing, preparing (br

• Securities purchased under agreements to reseh market and selling tangible pnxlucts and services. Risk arxl

(" reverse repurchase agreements") are related to the reward are directly related to the ability to manage those liability account: Securities sold under agreements to activities. hnancialleverage comes from realiging an ade-repurchase (" repurchase agreements"). These typically quate return on share owners equity withjudicious use of represent highly liquid, short-tenn investments of excess txinuwed funds.

funds or borrowing of such funds from others. At year-GEFS is not a " captive finance company" or a vehicle for ends 1988 and 1987, the balances (lxith assets azulliabili-

"off-balance-sheet fmancmg" for GE. In fact, very httle of ties) were solely those of Kidder, Pealxxly in connection its business is directly related to other GE operations. Its with its broker <lealer activities.

pnncipal businesses provide financing, reinsurance and e GE's current receivables are mainly amounts due broker-dealer services to third parties.The underlying fmm cust mers ($5.3 billion at December 31,1988 arxl characteristics of these businesses involve the management

$5.5 billion at December 31,1987) Receivables" turned of financial risk. They do not develop, manufacture and over" 7.01 times in 1988 compared with 6.81 times in sell pnxlucts arx! services wheic risk and reward hinge on 1987. (" Turnover" relates receivables to sak s arxl is a customer satisfaction as with, fbr example, an aircraft rneasurement of collection efIiciency. Higher turnover engine or the delivering of a message over a TV network.

indicates faster collections.) GE's trerxl in this area has been Their risk anxl reward are related to the ability to provide fmuis at competitive rates coupled with creative value-impruving since 1985 as the result of vigorous manage-ment attention to credit anxi collections. Other receivables added senices.

These fuixlamental differences are reflected in the measurements, such as delinquency ratios and amounts p st due, also have been improving, and the overall condi-measurements commonly used by investors, rating agen-h dmwm renaWs mabM eweHem at We eM -

cies arnt firiancial analysts. These differences will becoine of 1988. Current receivables other than amounts owed by clearer in the discussion that iollows with respect to the more significant items in the two financial statements.

customers are amounts that did not originate from sales of GE pnxtucts or services, such as advances to suppliers in connection with large contracts.

GE/S&P 500 annual dividends per share increase compared with 1983 60%

48 P $(H) 1984 1985 1986 1987 1988 36

4 e inventories of $6.5 billion at the crxl of !988 were Not eamings retained for growth slightly higher than the $6.3 billion at the erx1 of 1987.

and used for dividends (in dollars per share)

Inventmies turned over 4.38 times in 1988 cornpared with

$4.0 l

4.25 times in 1987. As with receivables, this is a measure-ment of efficient use of resources anxi has been showing

% 12 steady impmvement in recent years. Principalinventory

@A 2A increases were in GE Airtraft Engines arxl GE Plasucs m anticipation of higher sales. S<nne of the larger reductions M 73 occurred in GE Aerospace am! fmm the sale of the semi-coixluctor business. In 1988, cost of sales was charged for Mg

.8 last in first-out (LIFO) revaluation of $150 million because a Retained for gn=th y

y sy 0 of higher prices.The $324 million increase in the LIFO

= turidends revaluation in 1987 was mostly related to fhe inventory 1984 1985 1986 1987 1988 accotmting change discussed in note 1. In 1986, there was a net favorable LIFO adjustment to cost of sales, including a $51 million reduction in LIFO reserves because of NPertw plant and equipment (including equipment reduced inventory levels mainly in power systems ased to others) aggregated $ 13.6 billion at December 31, businesses.

1988 and $ 13.0 billion a year eather. GE's property, plant and equipment consists ofinvestments (br its own produc-e (IEFS' financing receivables grew to $35.9 billion in live use, whereas the largest element of GEFS' investment 1988, an $8.0 billion (29%) increase. Note 17 includes is in equipment that is provided to third panies on operat-extensive inibnnation aint detads about these receivables

• ing leases. Details by categories ofinvestment can be thund Time sales and loans grew $7.2 billion with all principal in note 19.

j categories of kians up except "home aixi recreation financ-GE's total experxfitures for new plant and equipment ing." The largest increase ($4.1 billion) was in " retailer during 1988 were $2.3 billion, bringing the total (br the financing, mainly due to the acqmsmon of Montgomery last five years (exclading the unusually large addition by Ward s credit operations during the year. Investment m acquisition of RCA in 1986) to $10.5 billion. Of that five-

" direct financmg leases" increased $ 1.0 billion to $8.4 bil-vear total,33% was to increase capacity; 25% was to lion from year-end 1987, and leveraged leases of $2.7 bil-increase pnxluctivity; 13% was to support new business lion were about the same as at the eixt of the prior year.

Noncarning and reduced-earning financing receivables su-ups; 13% was to replace ami renew older equipment; and 16% was for such other purposes as improving R&D were less than 1% of earning assets at the eml of each of facilities and safety arxl enviromnental protection. Of GE's the last two years. The allowance for losses that is deducted

$2.3 billion current-year expenditures, about $400 million in atriving at the $35.9 bilhon balance mcreased from was attributable to acquisitions of businesses. Current-year

$743 million at the end of 1987 to $972 milhon at year-end depreciation and dispositions of plant and equipment vir-1988. Detads of changes m the reserve balance can be tually offset current-year additions.

1 finux! in note 9. These included additions by charging GEFS added $ 1.5 billion to its equipment leased to opemtions ($434 milhon m 1988, $290 milhon in 1987 and others. Current-year amortization was $665 million.

$558 million in 1986) ami write-offs of $291 million in e intang.ble assets aggregated $8.6 billion at the end of.

i 1988, $171 million in 1987 and $461 million in 1986.

l Overall net loss experience as a percent of average financ-1988. The majority of thts consolidated total is GE's intan-p es, wMi were $7.0 billion at that date or $2.6 billion ing receivables was 0.81% in 1988,0.62% in 1987 and 2.02% in 1986, a year when large energy-related write-offs m re than a year earh,er. The largest portion of GE's bal-werr made. At the end of 1988, the reserve coverage on ance (in both g(xxlwill and other mtang bles) arose from financing receivables was equal to 2.63% of the receivables b; dance outstanding, up Imm 2.59% at the crxl of die pre-vious two years. In summary, GEFS' financing receivables are in good condition and reserve protection is strong.

1 37

- ~ _ - - - - _ _ -

a i

the acquisition of RCA Cor[x> ration in 1986. Increases tenn debt that is due to be paid in 1989, most ofit related during 1988 mainly reflected goodwill from the acquisi-to the RCA acquisition in 1986. GE's total debt at the end tions of Ilorg-Warner's chemicals businesses, Roper Cor[x>-

._1988 equated 24.9% ofits total capital compared with

^

ration, a TV station in Miami, Fla., and final valuation of 25.1 % at the end of 1987. This relationship of debt and CGR medical business assets.

equity capitalis sound and is within the range of what e All other assets totaled $8.0 billion at December 31, would be expected of a strong industrially oriented finn.

1988 compared with $6.6 billion a year earlier. These are a GEFS' total lxirrowings were $39.6 billion at Decem-wide variety ofitems as detailed in note 21, in prior years, ber 31,1988, of which $28.7 billion is due in 1989 and GE's deferred tax asset was included in this category. How.

$10.9 billion is due in subsequent years. Comparable ever, as a result of the new consolidauon, this asset is now amounts at the end of 1987 were: $30.9 billion total; shown as a " negative liability" under " deferred income

$22.8 billion due within one year; and $8.0 billion due taxes"in the Statement of Financial Position to provide beyond that. The increases were to sup[xwt the growth in proper consolidation with GEFS' deferred income tax GEFS' carning assets. As noted earlier in this discussion, GEFS' primary business is management of financial risk l

credit.

involving lx>rrowing money at favorable rates and provid-e Total borrowings on a consolidated basis aggregated ing funds to others at higher rates along wnh creauve

$45.5 billion at December 31,1988. Ilowever,Ix>rrowings value-dded services. GEFS' comIx> site interest rates were must be looked at separately for GE anxl GEFS. The major discussed in connection with the Statement of Earnings. A debt-rating agencies evaluate the financial condition of the large Imrtion of GEFS'lxerowmgs is in the funn of com-entities separately becauseuf their distinctly different busi-nwrcial paper ($24.6 billion and $ 18.8 billion at the end of ness characteristics. Using criteria appropriate to each, 1988 and 1987, respectively). Most of this commercial those major rating agencies continue to give top ratings to paper is issued by GE Capital. Its commercial paper has debt ofInth GE and GEFS.

niaturities f up to nine nmndisme average remaining GE's total lx>nuwings were $6.2 billion at the end of tenns of GECC's commercial paper were 23 days arxl 36 1988. Iong-term f xwrowings were $ 1.3 billion compared 4m k mM WM M WE mpMy.hmge with $4.5 billion a year ago, anxi short-tenn lxwrowings interest rates on GECC's commercial paper were 9.32%

were $1.9 billion compared with $1.1 billion at the end of and 7.73% at the end of those respective years. Iligher 1987. Short-tenn lorrowings include $ 1.2 billion of long-1988 rates reflected general financial market conditions.

" leverage," the relationship of debt to equity capital, is expected by investors to be much higher in a financial enterprise than in an industrial enterprise. GECC's ratio of debt to equity was 7.67 to 1.00 at the end of 1988 com-pared with 7.98 to 1.00 at the end of 1987. This relation-ship of debt to equity capital is believed to be sound and is appropriate for a highly rated financial services enterprise.

Notes 22 and 26 provide details of short-term and long-term lxinuwings.

Consolidated total assets (In billions)

$120 1981 1985 1986 1987 1988 38

I 1

Statement of Cash Flows llased on past performance and current expectations, in This statement replaces the former Statement of Changes combination with the financial flexibility that comes with in Financial Position to comply with a new Financial the highest credit ratings, GE is well positioned to continue Accounting Starxlards lloani requirernent. The focus is on making long-term investments for future growth, includ-j cash, whereas GE's fonner statement had a somewhat dif.

ing selective acquisitions and investments injoint ventures, l

ferent orientation on " funds." The new statement empha.

to enhanc.e share ownerinvestment.

j sizes cash flows fnnn three broad categories-operating GEFS activities, investing activities and financing activities. Inas-GEFS' principal source of cash is financing activities that much as the cash management activities of GE and GEFS involve continuing rollover of short-tenn borrowings and are separate and distinct,it is more useful to review the appropriate addition oflong-term borrowings, with a rea-separate cash Ilow statements than the consolidated sonable balance of maturities. Over the past three yeais, stateinent.

GEFS'lx>rmwings with 90-day or less maturities have gE increased a total of $11.8 billion. New borrowings of GE's cash and equivalents (cash and marketabbcurities)

$24.3 billion having maturities longer than 90 days were aggregated $ 1.9 billion at the end of 1988, a decrease or added during those years while $21.1 billion of such

$789 million during 1988. Net cash of $773 million was longer-term lx>rrowings were paid off.

generated in 1987, while there was a net cash usage of GEFS' principal application of cash has b: en in invest-

]

$638 million in 1986.

ing activities to grow the business. Of the $22.8 billion j

GE's largest source ofcash is its own operations. These of net investments by GEFS over the past three years, have provided an aggregate of more than $11 billion of

$ 14.3 billion was devoted to additional financing receiv-cash over the last three years. The largest ongoing uses of ables. Other principal investments during these years were I

cash by GE are usually expeixlitures for new plant and

$ 1.7 billion to acquire new businesses as GEFS expands its equipment, which aggregated $5.6 billion over the past activities and $3.1 billion for new equipment, which is three years (included in investing activities) and dividends mainly for lease to others.

to share owners, which aggregated $3.5 billion during the The difference between cash used for new investments last three years (included in financing activities). Thus, and cash provided from additional Ex>rrowings has been GE's operating activities have provided more than enough met mainly by generation of $7.3 billion of cash from cash to cover these basic corix> rate activities arxl to gener-OPemting activities for the years 1986-1988 arxl from issu-i ate cash for other endcavors.

ance of $0.6 billion cumulative variable preferred stock by i

In 1986, GE paid $6.4 billion for RCA ($6.1 billion GE Gapital in 1988. GEFS' cash and equivalents balance l

excluding RCA's cash on hand at the time). This required has remained relatively stable throughout the period -

borrowing $3.4 billion oflong-term debt. Some short-tenu again in keeping with its business mission.

debt also was issued at the time, but it was promptly repaid In summary, based on past performance and current by a combination of dis [msitions of certain RCA businesses expectations, in combination with the financial flexibility and cash pmvided from opemtions. In 1988, GE made that comes with excellent credit ratings, GEFS is well several acquisitions, the principal ones of which required positioned to continue growing its earning assets and to cash outflow of $3 billion. These acquisitions were paid for produce a gcxxl rate of return on GE share owners' invest-l lxutly from cash on hand and partly from new lxurowings.

ment in GEFS.

These acquisitions more than accounted for the $789 mil-lion reduction in cash-equivalent balances noted alove.

39

Managemenn Discussion ofSelected Financial Data Selected financial data summarizes on one page some data acquisition. Cun ent total employment levels are now frequently suluested alx>ut General Electric Q>mpany and slightly below where they were at the end cf 1985, provides a secord that may be usefulin ieviewing trends.

although revenues have increased 54% since that year.

The data on the op}xisite page are presented in a different GE's total backlog of unfilled orders at the erxl of 1988 was format than in previous years. The upper portion presents

$27.3 billion. Orders constituting this backlog may be can-inIbnnation on the basis of the new consolidation. Follow-celed or deferred by customers (subject in certain cases to ing that are certain data that reflect GE operations with cancellation penalties). Onnments on unfilled orders for various traditional measurements appropriate to the GE Aircraft Engines and GE Aerospace (which together industrial businesses. Finally, there is a section providing rnake up over 70% of the year-end 1988 backlog) can be key infonnation and ratios pertinent io GEFS. Certain found in the discussion of hxlustry Segments, which additional comments ami information Ibliow.

begins on page 32. About 49% of the 1988 total unfilled GE's total research and development experalit ur es wer e orders is scheduled to be shipped in 1989 with most of the

$3.6 billion in 1988. Of this, $ 1.2 billion was from GE's remainder to be shipped in the two years after that. For j

own fumis and $2.4 billion was from funds provided by comparison, about 57% of the 1987 backlog was expected i

customers, mainly the U.S. government. C nnparable to be shipped in 1988.

amounts for 1987 were: total expenditures ~ $3.0 billion; Unfilled orders for export of all types of pnnlucts and Company-fu nded - $ 1.2 billion; and customer-funded -

services from the United States were $8.2 billion at Decem-

$ 1.8 billion. The increase m customer funds in 1988 was ber 31,1988, up from $6.0 billion the year before. The mainly for GE Aerospace projects. During the years backlog of aircraft engine orders increased by almost 60%

1984-1988, GE's total R&D expenditures from all sources and made up a large majority of the 1988 unfilled export of funds aggregated ahnost $15 billion.

orders backlog.

Consolidated worldwide employment at the end of each inflation has not been a significant fiictor in consolidated of the last five years, segiegated between GE and GEFS,is net earnings growth in recent years because of the rela-depicted in the chart below. The table on the opposite tively modest rate of price increases in the economies of page presents the same data with respect to employees the United States and of the principal (breign countries kicatnlin the Unitcd States and in other countries.The where the Company has operations.

increase in employees in 1986 was because ofIhe RCA Regarding environmental matters, the operations of the Company, like those of other companies engaged in simi-lar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. While it is extremely difficult to quantify the [x> ten-tial impact of actions regarding environmental matters, k

particularly remediation efibrts that the Onnpany may undertake in the future, in the opinion of management compliance with the present laws governing environmen-tal protection will not have a material eff ect on the Gun-pany's expenditures, earnings or competitive position.

Consolidated employment at year end (in thousands) 375 300 225 150

\\

i 75 4

l 8 GEI'S i

0 e GE 19M 1985 1986 1987 1988 10

.____-_..--_---__-_----_-______-___---__J

q a

Selected FinancialData (Dollar amounts in millions; per-share amounts in dollan) :

1988 1987 1986 1985 1984

' General Electric Company and consolidated affiliates Revenues 5 50,089: '$ 48,158 - $ 42,013 $ 32,624 ' $ 31,442

. Earnings before extraordinary kiss arxl cuinulative cirect of accounting changes 3,386 2,119 2,492-2,277 2,239 Net earnings 3,386 2,915 2,492 2,277 2,239-Dividerxis declared 1,314-1,209-1,081 1,020

'930 i

)

Earned on average share owner s' equit y 19.4 %

18.5%

17.3 %

17.5 %

19.0 %

lYrshare Net earnings 3.75 $

3.20 $

2.73.$'

2.50 2.47

)

Divideixls declared 1.46 1.32 %

1,18 %

1.11 %

1.02%

]

Stock price range 47 %-38 % 66 %-38 % 44 %-33 % 36 %-27 % 29 %-24 %

i Tbtalassets 110,865 95,414 84,818 49,123 43,860 long-tenn lx>rrowings 15,082 12,517 10,001 5,577

.4,818 '

Shares outstarxling - average (in thousands) 901,780 911,639 912,594 -

910,762 907,360 Shane owner accounts-average 529,000 491,000

'492,000 506,000 520,000 -

Employees at yearend Domestic 255,000 277,000 302,000

'43,000 255,000 -

3 Foreign 43,000 45,000 71,000 56,000 68,000 Total employees 298,000 322.000 373.000 299,000 323,000, GE data Short-tenn ixirrowings

$ 1,861

$ 1,110 $ 1,813 $ 1,297

$ 1,047 long-tenn lx>rrowings 4,330 4,491 4,351 753 753 Mincrity interest 228 190

.189 126 128 Sharc owners' equity 18,466 16,480 15,109 13,671 12,398

'Ibtal capitalinvested

$ 24,885

$ 22,271

$ 21,462

$,,15,847 ' $ 14,326 Ret urn on average total capital invested 16.4 %

14.7 %

13.9 %

16.2 %

17.6 %

Bonuwings as a percentage of total capital invested 24.9 %

25.1 %

28.7 %

12.9 %

12.6 %

1 Current assets

$ 15,499

$ 15,739 $ 14,288 $ 12,546

$ 11,552 Current liabilities 13.419 12,671 11,461 8,919 8,607 -

i Wor king capital

$ 2,080 $ 3,068 $ 2,827

$ 3,627

$ 2,945 Property, plant and equipment additions (other than by acquisition of RCA)

$ 2,288 $ 1,778 $ 2,042 $ 1,953 '$

2,419 Year-end orders backlog 27,265 22,737 23,943 23,117 22,577 GEFS data Earnings before extraonlinary loss and ctunulauve effect of accounting change 788 $

552 $

504.$

413 $

329 Net earnings 788 1,008 504 413 329 Share owner's equity 4,819 3,980 2,994 2,302 1,874 Earned on average share owner's equity 18.0%

18.0%

19.7 %

19.9% '

19.1 %

Bonuwings from others S 39,593

$ 30,885

$ 23,397

$ 16,393' $ 13,402 Ratio ofdebt to cquity (GE Capital) 7.67:1 7.98:1 7.83:1 7.89:1 7.97:1 Earning assets of financing businesses

$ 42,173

$ 32,423

$ 25,169 $ 20,169

$ 17,054 Reserve roverage on fmancing receivables 2.63 %

2.59 %

2.59 %

2.57 %

2.54 %

Insurance premiums written

$ 1,809 $ 1,729 $ 1,704

$ 1,092 $

637 Securities btuker<lealer carned income 2,316 2,491 1,176 See notes I amt 26 to the consolidated financial statements for information about 1987 accounting t hanges and extraordinary loss, and notes 2 and 3 for information almut actluisitions and related matters. "GE" means the fonner basis ofconsolidation as described in note I to the consolidated tinamial statements; "GEFS" means General Electric Financial Sen ices, Inr. and all of its affiliates and associated companies.

Transactions hetween GE and gel'S have been eliminated from the " consolidated data." Stune data reflect the 2-for 1 stm k split in April 1987.

41

. Management's Dhcussion ofFinancial Responsibility The financial infonnation in this rep >rt, including the Peat Marwick Main & Co. provide an objective,inde-audited financial staten ents, has been prepared by man-

. pendent review of management's discharge ofits obliga-l agernent. Preparation of financial statements arxl related tions relating to the fairness of reported operating results 1

data involves estimates and the use orjudgment. Account-arxl financial corxlition. Their report for 1988 appears on

'l ing principles used in preparing the financial statements the opposite page.

are those whic h are generally accepted in the United The Audit Committee of the lloani(consisting solely States. These principles are consistent in most imp >rtant of Directors from outside GE) maintains an ongoing i

. respects with standards issued by the International appraisal-on behalf of share owners - of the effective-i Accounting Starxlards Committee. Where there is no sin-ness of the independent public accountants, the Com-gle specified accounting principle or standard, manage-pany's staff of corporate auditors and management, with ment makes a choice from reasonable, acceped respect to the financial reporting process, and of the ade-alternatives, using meth<xis which it believes are prudent quacy ofinternal financial controls. The committee also i

fi>r General Electric Company and its consolidated reviews the Company's accounting policies, internal l

affiliates, accounting controls, and the Annual Report and proxy

'li) safeguard Company assets, it is important to have a material.

souixl but dynamic system ofinternal financial controls

)

and pnice lures that balances benefits and costs. One of the key elements of internal financial controls has been the Company's success in rrcruiting, selecting, training

/

and developing professional financial managers. Their urspmsibilities include implementing and overseeing the John E Welch,Jr.

financial control system, reporting on management's Chainnan of the lloard and stewaniship of the assets entrusted to it by share owners, Chief Executive Officer and perfonning accumte and proper maintenance of the accounts.

Management has long iecognized its responsibility for.

corxiucting tile af fairs of the Cornpany and its afiiliates in Dennis D. Dammerman an ethical and sodally resp <msible manner. General Electric Senior Vice President Company is dedicated to the highest standards ofintegrity.

Finance I

integrity is not an occasional requirement but a continuing commitment which is reflected in key written policy state-Febniary 10,1989 i

nwnts. These cover, among other subjects, p>tentially con-Ilicting outside business interests of employees, compliance with antitrust laws. and proper domestic and international business practices. Management insists on maintaining the j

highest standards ofcoixtuct and pmctices with respect to 1

transactions with the Unital States govenunent. There is continuing emphasis to all employees that even the l

appearance ofimpropriety can enxie public confidence in the Company arxl in the government procurement procesa. Ongoing alucation, communication and review programs are designed to create a strong compliance envi-ronment and to make it clearly understood that deviation fnun Compuiy inlicies will not be tolemtal.

4

'k l

Independent Auditors' Report T2 Share Owners and Board of Directors of General Electric Company I

~ We have audited the accompanying statement of financial

[msition'of Generiil Electric Onnpany and consolidated alliliates as of December 31,1988 arxl 1987 and the related statements of carnings and cash flows for each of the years in the three-year peri <xl erxled December 31, l

1988. These consolidated financial statements are the responsibility of the Gmnpany's m.:nagement. Our respon-sibility is to express an opinion on these consolidated

I financial statements based on our audits.

We corxlucted our audits in accordance with generally accepted auditing standards. Those standards require that we plan arul perform the audit to obtain reasonable assur-ance about whether the financial statements are free of material misstatement. An audit includes examining, on a.

rest basis, evidence sup[orting the amounts arxl disch>-

sures in the financial statements. An audit also includes assessing the accounting principles used arul significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned financial statements i

appearing on pages 24-29 and 44-70 present fairly,in all material respects, the financial [x>sition of General Electric Company and consolidated afTiliates at December 31,1988 anxl 1987, arxl the results of their opemtions and their cash I

flows for each of the years in the three-year period ended j

December 31,1988, in conformity with genemlly accepted accounting principles.

I As discussed in note I to the consolidated financial state-l ments,in 1988 the Company changed its methcxl ofinclu-sion of previously unconsolidated affiliates; anxlin 1987 the Company changed its methods of accounting for income taxes and overhead recorded in inventory. We concur with these accounting changes.

b d h 6 % n c.'d. W W:

d I

Peat Marwick Main & Co.

[

Stamford, Connecticut l

February 10,1989 l-

i i

43

l Notes to Consolidated Financial Statements

} Summary of Significant Accounting l

Note Subject Page Note l

1 Sununary of Significant Accounting Policies Policies 44 2

GE Aaluisitions and Related Matters 48 Consolidation and financial statement presentation 3

GEFS Acquisitions and Related Matters 49 in 1988, GE was required to adopt two new Statements of 4

GE Other income 49 Financial Accounting Standards (SFAS): SFAS No. 94 -

5 GEFS Earned Income 50

" Consolidation of All Majority-Owned Subsidiaries"; and j

6 Supplemental Cost Details (excluding SFAS No. 95

" Statement of Cash Flows." These changes unusual expenses) 50 are in addition to changes made in 1987 to implement 7

Pensions and Other Retiree lienefiu 51 SFAS No. 96 " Accounting for Income Taxes" and to 8

Interest and Other Financial Charges 52 modify GE's accounting pmcedures to include in inven-9 GEFS Allowance liir Losses on Financing tory certain manufacturing overhead costs previously Receivables 52 charged directly to expense.

52 10 Unusual Expenses Consolidation.The consolidated financial statements now 11 Provision for Income I axes (excluding 1987 represent the adding together of all companies in which -

extramxlinary item and cumulative elfect General Electric Company directly or indirectly has a of changes in accountiag principles) 53 majority ownership or otherwise controls (.'affih.ated com-12 Cash 55 tes P"".

".

• P * ' "8 7 e pnnapal one be. " Geneml Electnc l.yes 13 Mar ketable Securities Canied at Cost 55 th mg manaal Serv-14 GEFS Marketable Securities Carried at Market 55 Y " """

• • • ) "" "* "

"I g mp mes-were mcluded on the equity basis as one h.ne 15 GE Current Receivables 55

'". total carnings and net assets. This was pennissible under 16 GE inventories 55 pn r m es and, kcause hnanaal semes o[nanons am so 17 GEFS Financing Receivables (investment different in nature fmm and essentially unrelated to oper-in time sales, loans and financing leases) 56 tions of other GE businesses, management beheved that 18 Other GEFS Receivables from and Payables f n nci i statements were more understandable if GEFS to llrokers and Dealers 57 st tenwnts wm shown separately. It should be empha-19 Property, Plant and Equipment (induding that, using du new musoMauon pndum, s

equipment leased to others) 57 mnsolidated net earnings and share owners' equity are 20 lutangible Assets 58 unchangal for all periods presented. However, substan-1 21 AllOther Assets 58 tially more detail is reytyired under the new standard than Short Fenn llorrowings 59

/

22 under rules previously in effect. Also as a result of tlus 23 Accounts Payable 59 change, the Company adopted an unclassified consoli-24 GEFS Securities Sold but Not Yet dated statenwnt of hnanaal position.

Purchased, at Market 59 M n gement believes it is im;x>rtant to preserve as 25 GE All Other Current Costs and Expenses much as rmssible the identity of the principal financial data Accrued 59 nd mlatal measurements to which share owners and 26 tong-Term lionuwings 60 27 GE All Other Liabilities 62 pm have bemme accustomed over the years. Accord-

'"8 T' *"S"M"I"I IIn ncial st tements and notes now are I

28 Minority Interest in Equity of Consolidated Affiliates 62 M"".crally Presented.in a finmat that includes data grouped U "S I U

• S' T

29 Share Owners' Equity 63 30 Other Stock Related Information 63 e GE - this is essentially the fenner basis of consolida-31 Onnmitments and Contingent Liabilities 64 tion except that it indudes some very small financial serw 32 Supplenr ntal Cash Flows Informadon 64 ices affiliates previously not consohdated. The effect of 33 Industry Segment Details 65 transacuous among companies within this group has been 34 Geographic Segment Information eliminated. Where appropriate for clarification or empha-(consolidated) 69 sis, particularly in the notes. this group o entities also is r

35 Quarted) information (unaudited) 70 referred to as "GE except GEFS."

e GEFS-this affiliate owns all of the common stock of General Electric Capital unporation (GECC or GE Capi-tal)and of Employers Reinsurance Corporation (ERC) tt

J and 80% of the stock of Kidder, Pealxxly Group Inc.

Virtually all products financed by GECC are manufac-

. (Kidder, Peabody). These afbliates arxl dieir respective tured by companies other than GE.

affiliates are consolidated in the GEFS columns with the There is no change in method fbr consolidating compa-

-)

effect of transactions among them eliminated before the nies in which GE or GEFS owns between 20% and 50%

.l consolidated presentation.

(" associated companies"). Results of these companies are e Consolidated-these columns represent the adding '

stillincluded on a one-line basis, together of GE and GEFS. Ilowever, it is necessary t Cash flows. SFAS No. 95 now requires a Statement of remove the effect of tmnsactions hetween GE except Cash Flms in place of the former Statement of Changes in i

GEFS and GEFS to arrive at a consolidated total. The Financial Position. The principal result (in addition to con-I

" eliminations" used to arrive at these consolidated totals solidation) is to present analytical data of cash flow items are summarized below-rather than the former focus on changes in cash and mar-Eliminations ketable securities less short. term horrow ings for GE other On millions) 1988 1987 1986 than GEFS. For purposes of hnplementing this standard,

1. '# " #8

1. 1. 1. b Statement of Earnings Sales of gcxxis (5) $

cash equivalents. Certam of the securities so treated have Sales of services (26)

(8)

(5) maturities ranging between 90 and 365 days; but, as part Other income (5) 6 6

of GE's cash management program,' maturities are sched-cfin uled based on contemplated cash needs for the ensuing r

(

I m nths N amounts classified as " marketable secu-Totahrvenues (85a)

(583)

(526) nties carned at cost, and " marketable securities can-ied at Cost of gmxis sold (5)

Cost of services sold (26)

(8)

(5) in rket" are not treated as cash eqm.valents m the State-Intere.,t and other financial ment of Cash Flows.

Prior-year statements have been restated or reclassified Ot r sts and expenses 8

as appmpriate to confonn ther, the presentations I

Total costs arnt expenses (70)

(31)

(22) required by SFAS Nos. 91 ano A.

i Earnings before income i

taxes, extraordinary item Pensions and other retirement benefits. A ccounting poli-and cumulative effect of cies fbr pensions and other retirement benefits are dis-I accounting c,hanges (788)

(552)

(504)

Extraord. mary nem 62 cussed in' note 7.

Income tax accounting income taxes. SFAS No. 96

" Accounting ihr Income change (518)

Taxes" was issued by the Financial Accounting Standants Net earnings S (788) $(1.008) $ (504)

Board in December 1987. A requirement of SFAS No. 96 Statement of Financial Position is that deferred tax liabilities or assets at the erxl of each GE current receivables

$ (330) $ (37) period be determined using the tax rate expected to be in

$F$1$iEiUI effect'when taxes are actually paid or recovered. Accord-(1 Investment in GEFS (4.819)

(3.980) ingly, under SFAS No. 96 rules, income tax expense provi-sions will ir crease or dccrease in the same period in which Total assets

$(5.363) $(4.292) s a changdn tanates is enacted. Previous rules required Short-tenn lx>rrowings

$ (170) $ (85)

Accounts payable (264)

' (216) providing dc ferred taxes using rates in effect when the tax long-term Innuwings (i10)

(11),

asset or liabliity was first recoitled without subsequent Totalliabilities (544)

(312) adjustment solely for tax-rate changes (except with respect GEFS equity (4.819)

(3.980) to leveraged leases).

'listalliabilities and equity

$(5.363) $(4.292)

In conibnnity with SFAS No. 96 transition rules, the Sta.ement of Cash Flows Company elected to adopt the new income tax acmunting Net earnings (operating during 1987, The cumulative effect tojanuary 1,1987 ottivities)

$ (13) $ (213) $ 483

($577 million, including $518 million for GEFS) of the investing artivities (171) 243 (508)

Financing activities 181 (30) 25 change is shown m. the 1987 columns of. he Statement of t

Earnings. Also, as required, quarterly earnings reported

'li>tal 5

for 1987 were restated for the effect of this change on interim quarters in 1987 as ifit had occurred atJanuary 1.

Restated quarterly amounts can be found in note 35.

45

GE accounting policies Origination, commitment and other nonrefmxiable fees related to furviings are deferred and recorded in canxxl Sales. A sale is recorded when title passes to t t customer inco e on the mterest method. Commitment fees related or when services are perfonned in accordance with to I ns n t expected to be funded and hne<>f-credit fees contracts.

are deferred and reconled m earned income on a straight-Investment tax credit (lTC). The F1 C was repealed, with line basis over the period to which the fees relate. Syndica-some transitional exceptions, effectiveJanuary 1,1986.

tion fees are recorded in earned income at the time the

{

llowever, for financial re[x>rting pur}x>ses, GE has related services are performed unless significant contin-i defened recognition of the l'IC cach year arxl continues gencies exist.

l to amonize ITC as a se luction of the provision for income in 1987, GEFS adopted Statement of Financial i

taxes over the lives of the facilities to which the credit Accounting Staixlards No. 91

" Accounting for Nonre-apphes.

fundable Fees and Costs Associated with Originating or inventories. The values of most inventories are deter-Acquiring loans and Initial Direct Costs of Leases," which mined on a last-in first-out, or LIFO, basis and do not modified certain accounting principles that apply to non-exceed realizable values. EffectiveJanuary 1,1987 GE refundable fees and costs associated with lerxling and leas-changed its accounting pmcedures to include in inventory ing activities. GEFS' accounting practices with respect to certain manufacturing overhead costs previously charged such fees and costs already confonned substantially to the directly to expense. Among the more significant types of requirements of SFAS No. 91,and, accordingly, the effect l

manufacturing overhead included in inventory as a result of adopting the new accounting starxlard in 1987 was not of the change are: depreciation of plant and equipment; material.

pension and other benefits of manufacturing employees; Kidder, Pealxxly's proprietary securities and commodi.

and certain pnvluct-related engineering expenses. The ties transactions are reconled on a tmdc41 ate basis. Trad-Company helieves this change was preferable because it ing and investment securities are valued at market or provides a better matching of pnxluction costs with estimated fair value. Unrealized gains and losses on open related revenues in re[xnting operating results. In accord-contractual commitments, principally financial futures, ance with generally accepted accounting principles, the when-issued securities and forward contracts on U.S. gov-cumulative effnt of this change for periods prior toJanu-crnment arxl federal agency securities, are reflected in the ary 1,1987 ($281 million after pmv; ding fiar taxes of Statement of Earnings on a trade-date basis. Customers'

$215 million)is shown separately in 1987 in the Statement transactions and the related revenues and expenses are of Earnings on page 24. There was virtually no effect from reflected in the financial statements on a settlement < late this change on 1987 results after recording the cumulative basis. Revenues and expenses on a trade-date basis are not effect, and the pm forma effect on prior-years results materially different. Investment irmking revenues from was immaterial.

managenx nt fees, sales concessions and underwriting fees Depreciation, depletion and amortization.The cost of are recorded on settlement date. Advisory fee revenue is most manufacturing pl;mt and equipment is depreciated recorded when services are substantially completed and using an accelerated methcxl based primarily on a sum-of.

the revenue is reasonably determinable.

j the-years digits fornmla. If manufacturing plant and See " insurance afTiliates" on page 47 for infonn:uion j

equipment is subject to abnormal economic corxlitions or with respect to camed income of these businesses.

obsolescence, additional depreciation is pmvided.

Allowance for losses on financing receivables. G EFS maintains an allowance for losses on financing receivables GEFS accounting policies at an amount which it believes is sufficient to pmvide ade-j Methods of recording earned income. Income on all loans quate pmtection against future losses in the portfolio. For j

is canni on the interest meth(xl. For k>an contracts on small-balance and certain large-balance receivables, the I

which finance charges are precomputed, finance charges allowance for losses is detennined principally on the basis are deferred at the time of contract acquisition. For kian of actual experience during the preceding three years.

contracts on which finance charges are not precomputal Additional allowances are also recorded to reflect manage-but are billed to customers, income is recorded when ment'sjudgment of additional loss 1xnential. For other earned. Accrual of interest income is susperuled when col-iercivables, principally the larger loans and leases, the lection of an account lxunnes doubtful, generally after the account beannes 90 days delinquent.

Financing lease income that includes related investment tax credits and residual values is recordal on the interest

-l method so as to pnxtuce a level yield on fmuls not yet recovered. Unguaranteed residual values included in lease income are lased primarily on independent appmisals of j

the values ofleased assets remaining at expiration of the i

lease tenns.

allowance for losses is determined primarily on the basis of reflect deferral and amortization of costs (primarily com-management'sjudgment of et loss [xitential, including missions) of acquiring premiums, arxl net the effects of specific allowames fiir krmwn tniubled accounts.

certain specialty reinsurance transactions.

All accounts or [xntions thereof deemed to be uncolk c-Premiums on short-duration insurance contracts are tible or to require an cu essive collation cost are written re[x>rted as earned income over the tenns of the related of f to the allowance for losses. Small-balance accounts are reinsurance treaties or insurance policies. In general, progressively written down (from 107c when more than eamal premiums are calculated on a pro-rata basis or are three months delinquent to 100% when more than 12 detennined basal on repmts received from reinsureds.

months delinquent) to record the balances at estimated Premium adjustments under retrospectively rated reinsur-realizable value. Ilowever, if at any time during that period ance contracts are recorded based on estimated losses and an account isjudged to be uncollectible, such as in the case lost expenses, including lxith case and incurred-but-not-of a bankruptcy, the remaining balance is written off.

reportal (IBN R) reserves. Revenues on long-duration larger-balance accounts are resiewnl at least quarterly, contracts are reported as camed when due.

arnt those accounts which are more than three months Deferred insurance acquisition costs are amortizal as delinquent are written down,if necessary, to record the the related premiums are earned for property and casualty balances at estimated realizable value.

business or over the premium. paying periods of the con-Marketable securities. hiai ketable securities of Kidder, tracts in proportion to anticipated premium income fi)r Pealxxly are carried at market value with the difference life insurance business. l>ferred insurance acquisition hetween cost and man ket value included in operations.

costs are reviewed for recoverability, and, fiar short dura-hlar ketable debt securities held by all other GEFS affiliates tion contracts, anticipated investment income is considered are carried at amortized cost. Alarketable equity secmities in king recoverability evaluations.

ofinsurance alliliates are canied at market value, and The estimated liability ihr outstanding losses and loss unrealized gains or losses, less applicable deferred income expenses consists of case reserves based on reports and taxes, are recognized in equity.

edmates oflosses and an IBNR reserw based primarily Securities purchased under egreements to resell (reverse on experience, excep' where experience is not sufhcient, m which case.uxhsstry averages fer the particular insur-repurchase agreements) and securities sold under agree-ments to repurchase (repurchase agreements). stepur-ance products are used. Estimated amouuts of sah age and (hase and reverse repurchase agreements are treated as subrogatmn recoverable on pa.d and unpaid losses are i

financing transactions and are canied at the contract deducted from outstanding losses. The liability h>r future pob.cy beneh.ts of the life insurance alliliates has been com-amount at which the securities subsequently w.ll be resold i

puted ma. ly. by a net-level-premium methal based on m

or reacquired. Repurchase agreements relate cuber to mai ketable securities, which are canied at market value, assumptions for investment yields, mortah.ty ar.d tennina-or to securities obtamed pursuant to reverse repurchase tions that were appropriate at date of purchase or at the time the [x>h..eies were developed, m.cluding provisions for agreements. It is GEFS, policy to take [x>ssession of secun.-

adverse dettat ons.

ties subject to reverse repurchase agreements. GEFS mon-itors the market value of the underlying securities in relation to the related receivable, induding accrued inter-est, and requests additional collateral if appropriate.

Depreciation and amortization. The cost of equipment leasal to w hers on operating leasca is amortized, princi-pally on a straight-line basis, to estimated net salvage value over the lease term or the estimated economic life of the equipment. Depreciation of property and njuipment for G EFS' own use is reconled on either a sum-of-the-years digits or a straight-line basis over the lives of the assets.

Investment tax credit ilTCh ITC associatal with equip-uk'llt on operating leases arul buildings arxl equipment is deferral and ammtized over ihe lives of the underlying assets.

Insurance affiliates. The accounts of insunux e alliliates are adjusted from accounting practices prescribed by state insurance regulatory authorities to a " generally accepted accounting principles" hasis. The principal adjustments 47

Nota ] GE AcquhitionscndRel:tedMatt2rs in June 1986, GE acquired RCA Corporation and its subsidiaries in a transaction for w hich the total con.

During 1988, GE cornpleted a number of acquisitions.

sideration to former RCA shareholders was $6.4 billion in The largest of these were:

cash. RCA businesses included the manufacture arxl sale

• Roper Corporation, acquired in April for $507 mil-of a wide range of electronic products and related research lion cash. Roper's principal businesses were the inanufac.

arxl services fiar consumer, commercial, military and space ture and sale of gas arxl etwtric ranges and outdoor [mwer applications; the National lituadcasting Company's radio garden equipment. In Decernber, GE sold Roper's garden arxl television stations and netwar k broadcasting senices; equi [nnent business fi>r $295 million cash. Roper's kitchen arxl domestic and international message and data commu-appliance teiness has anr,ual sales of about $375 million.

nications services.

• llorg-Warner's chemicals businesses, acquired in Sep-The acquisition was accounted fiar as e purchase, and teudier li>r $2.3 billion cash. 'lhese businesses (annual the o[rrating results of RCA have been conso:idated with sales of about $1.6 billion) manufanure and sell pnxlucts ilu.e of GE sinceJune 1,198ti. The purchase price was i

alloc ted to the assets and liabilities of RCA hased on complementary to GF/s plastics businesses.

Iloth of these auguisitions were accounted for as pur-appraisal arxl evaluation studies completed during 1987 chases with the excess of purchase price over the estimate rxl to g(x>dwill ($3.7 billion), which is being amortized on of fair values of net assets acquirni recorded as g(xxiwill.

a straight-line basis over 40 years.

See note 20.

Unaudited pro finnna results of opet ations of GE except llusiness dis [x>sitions during 1988 included most of the GEFS fiir the year 1986, auuming RCA had been acquired GE Solid State (semiconductor) business; seven of NilC's at the beginning of that year, would have been sales of eight radio stations; RCA Global Communications, Inc.

$38,997 million, net earnings of $2,471 million and net (a provider ofinternational conununications senices); arul earnings per share of $2.71.These pro fonna operating Sadelmi-Cogepi, a fi> reign construction finn. Cash pn>-

results were prepared in 1986 based on estimates arxl ceeds from these tnmsactions aggregated about $700 mil-ssmnptions including purchase price alk>cauon. hnal lion. Aggregate annual sales of these businesses were purchase price alh> cation would not have changed the pro about $900 nullion.

f nna results significantly. Such pro f<inna results are not There was no material effect on GE's business frem necessarily indicative of the consolidated results that would these 1988 acquisitions and dispositions.

have tren i eported if the RCA acquisition had actually On IAcember 31,1987, GE and a French electronics ccurred at the beginning of 1986.

company, Thomson, S.A., completed a transaction in in ccordance with agreements with agencies of the which GE acquired Thomson's medicat equipment busi.

United States government concerning the RCA acquisi-1 pess (CGR) and Thomson acquired most of GE's consumer tion, GE was required to sellits small militag vidicon busi-ek ctronics business. The total transaction included cash ness (which sale was completed in 1986).

received by GE of about $560 million. CGR's 1987 sales of Also soki during 1986 were activities involving audio about $800 milhon came mainly from digital x-ray, mam, tapes and recorcis, carpets, an insurance subsidiar) arxl a mography, computed tomography, ultrasound and related p rtfolio of securities investments.These transactions sales and senice in Europe and latin America. GEh con, were fin an aggregate cash amount of about $1.4 billion.

sumer ek ctronics business included mainiv GE and RCA Subsequent event bnuxi television sets, VCRs and audio pnxturts with sales of about $3 billion annually. GE will continue for anne inJanuary 1989, GE n eached agreements with General time to receive royahy income fmm patents related to con-Electric Company plc. (GEC), an unrelated cor[x> ration in sumer ekttmnics products. Other related closings, princi-the United Kingdom, to combine European business inter-pally fi>r offshore consumer electrouks operations, took ests in appliances, medical systems, electrical controls and, place in 1988. CGR's assets and liabilities were included in potentially, gas turbines. Fourjoint ventures are contem-GE's December 31,1987 Statement of Financial Position plated with the spec ific corporate organizations yet to be based on preliminary, estin<ated data that were reviewed decided. Ilesides the businesses and resources to be con-arx! colnpleted during 1988. Coristnner electronics assets tributed by the parties to diese ventures, GE will pay to arxlliabilities were removed fnnu GE's 1987 year-end bal-GEC a cash consideration of approximately f325 million antes. The net asset value of the of fshore operations sokj iS580 million). Subject to requisite governmental approv-to Thomson in 1988 was canied in "all other assets" at als, comp!ction of the transactions is expected in 1987 year end.

mid-1989.

Also during 1987, activiti, s involvmg a "new pnxtucts" division and NilC's radio networks were sok! for cash aggregating about $90 inillion anxl a note for $3 inillion.

In addition, GE donated RCA's David Sanmif Rescanh Center :o a not-for-profit organization in 1987.

The effect of these 1987 transactions was not material.

1 18

~

Note 3 GEFS Acquisitions end Releted acquisition"). In October 1986, Kidder, Peabody Group Metters Inc. was organized as the holding company parent of Kidder, Pealxxly & Co. Incorporated.

InJune 1988, as part of the management-led auluisition

%e Kidder, Pealxxly acquisition was accounted for as a of hlontgomery Ward & Co., incorpomted (Montgomery purchase, and, accordingly, the purchase price was allo-Ward) from Mobil Cor;xnation, GE Capital acquired cated to the assets arxl liabilities of Kidder, Peatxxly based Montgomery Ward's credit operations comprising Mont-on estimates of fair market values. The excess purchase gornery Ward Credit Cor]x>ratbn (MW Credit) and certain price over estimated fair value of net assets acquired related assets (collectively with M W Credit, MW Credit (goodwill) is being amortized on a straight-line basis over Operations) for a cash purchase price of $718 million.

30 years.

GE Capital and Kidder, Pealxidy auguired 40% atxt 101 If the Kidder, Pealxxly acquisition had occurred on Jan-respectively, of Montgomery Ward's common stock for a uary 1,1986, management estimates that camed income wh purchase price of $4 million arxl $1 million, respec-and net earnings of GEFS for the year ended December i

tirely. In addition, GE Capital and Kidder, Peatxxty paid 31,1986 would have been $6,691 million arxl $516 mil-cash of $82 million and $8 million, respectively, fi>r pre-lion, respectively. Such results are not necessarily indicative fen ed stock in Montgomery Wani. The management-led of those that might have occurred had the acquisition I

auguisition of Montgomery Ward was partially financed taken place at the twginning of 1986. There would not by GE Capitalin he fi>rm of a $275 million subonlinated have been any significant pm fi>nna efrect on consolidated loan.

net earnings per share from this transaction.

The acquisition of the MW Credit Opemtions was accounted for as a purchase, and, accordingly, the pur-FGIC Corporation chase price was alk>ca ed to the assets and liabilities of MW During Matrh 1988, GE Capital increased its investment Credit Operations based on estimates of fitir value. The in F(;1C Corporation (FGIC) by purchasing common excess purrhase price over estimated fair value of net stock and convertible preferred stock of FGIC from certain assets acquinyl (goodwill)is being amortized on a straight-institutionalinvestors fi>r $74 million in cash. After con-line basis over 20 years.

version of all the preferred stmk into common stock in If the preceding transactions had occurred onJanu-September 1988, GE Capital owned 38% of FGIC's out-ary 1,1988 orJanuary 1,1987, management estimates suuxling common stock. In November and December that GEFS resuhs ofoperations C T the years ended 1988, GE Capital entered into separate agreements with December 31,1988 arxl 1987 would have been as Iollows.

four institutional investors providing ihr the purchase by on inuliono 1988 1987 GE Capital of an additional 44% of the outstanding FGIC common stock for $283 million in cash. Although subject Earned income

$10.889

$8,702 to regulatory approvals, these purchases are expected to rIlYi r.NI f$r be completed during the first quarter of 1989, at which in accounting principle 784 579 time GE Capital miends to acquire the remaining out-Net earnings 784 1,035 standing common stock of FGIC.

The above unaudited pm finnna infonnation has twen prepared based on assumptions that managenwnt deems Note 4 GEOtherincome l

appropriate, but the results are not necessarily iixlicative of those that might have <xturred liad die acquisitions taken Other income of GE except GEFS is summarized in the place at the beginnings of the respective years.The results table below, of MW Credit Ogwrations have been consolidated with GEFS since the date of acquisition. There would not have on insono 1988 19n W86 been any significant pro forma effect on consolidated net Royahy and icchnical carnings per share from this transaction.

agreements

$ 359

$ 283

$ 232 In July and December 1987, GECC acquired the out.

Marketable securities arxl tunL a$ companies starxling capital stock of D&K Financial Cor[x> ration As (D& K) and Gelm Corporation (Gelco), respectively, for an Customer financing 38 52 78 aggregate purrhase price of appmximately $535 million.

Other investments lloth entities are in the business oficasing vehicle flects Interest 13 15 62 Dividends 8

4 11 and other equipment. the acquisitions were accounted fiir other sundry items 45 101 269 as putthases. Results of operations of the acquired corpo-

$ 680

$ 649 noto rations have been included in GE Capital since their respective dates of autuisition and are not material.

OnJune 11,1986, GEFS acquirext (br approximately 00-4 im in&hiW8 dlim b 1987

$600 milhon in cash and notes an 80% mterest m sudder, hidwins of $178 million in 1986 from sales of Pealx xly & Co. Incor]xnated (the " Kidder, Pealxxty I"'" '.".a of E's long-held passive investment in equity secunties of'Ihshiba Corporation.

_]

am 5== e--d 'a-

-et * ">"""" sed"de w ""-"'""- *'d-change in tax rates from the rates assumed for a leveraged GEFS earned income is summarized in the table below.

lease is recogninxi in the first accounting period ending on or after the date on which legislation affecting the tax rate (In minions) 1988 1987 1986 becomes law. For leveraged leases, this accounting elfect Time sales, loan,ir.vestnwnt and was a reduction in 1986 earned income from financing other incorne

$ 5.986 $ 4,475 5 3,008 leases, whidi was more than offset by a decrease in the tirfglllowing

(

Premium arx1 comnussion incone table.

of insuraru.e alliliates 1,802 1,748 1.582 Cmumissions arxl fees of securities (In millions) 1986 broker-dealer 625 728 361 gel S carned income from Reduction in carned irycome - financing leases operations 10,655 8,225 5,976 1nvestnent tax credit 5 97 O. her 75 t

Efin t on investnent in leveraget!

leases of change in tax-rate 172 assump: ions (172)

Rediation in income tax provision Sale of r,tm L hy nonconsolidated Change in investenent m leveraged leases 35 athliate 10 Additional effect of tax-rate < hange 357

$10,655 $ 8,225 $ 5,814 392 luctcase in net carriings

$220 The Tax Refonn Act of 1986 provided fiar a reduction 1

in corporate tax rates frotn 46% in 1986 to 40% in 1987 and 34% in 1988 and subsequent years. Utuler generally j

Details of earnedincome I)irect fmancing leases Eeveraged leases Total rinancing leases from financing leases (in millions) 1988 1987 1986 1988 1987 1986 1988 1987 1986 Defened income amortinsi investnwnt tax ctnlit

$ 20

$ 31

$ 68

$ 3

$ 10

$ 46

$ 23

$ 47

$114 Other 676 572 463 1(13 71 49 779 G13 512 696 603 531 106 87 95 802 6tH) 626 Gains on icalimliesidual values 39 44 32 29 4

45 68 48 75 Earned incour-financing icases

$735

$647

$563

$135

$ 91

$138

$870

$738

$701 Noncancellable future rentals due from customers for

$375 million; 1990- $431 million; 1991 -$276 million; nguipurnt on operating leases as of December 31,1988 1992- $195 million; 1993- $111 million; and $281 mil-totaled $1,969 million and are due as follows: 1989-lion thereafter.

s Note h SwietMa@taH@&dnpnelnM 1

Supplemental cost details aic shown in the table below.

Supplementalcost details 1988 1987 1986 (In millions)

GE GEFS Total GE GEFS Total GE GEFS Total Ernployee compensation,ituluding Smial Security taxes and other terefits

$11,690 $1,052 $12,742

$12,139

$959 $13,098

$11,775

$620 $12,395 Selling, general arnt administrative ex[ense 6.244 6.244 5,979 5,979 5,963 5,963 Depreciation, depletion anxl amortization of plant and niuipurnt induding equipment leasni to othen 1,522 744 2,266 1,544 369 1,913 1,460 365 1,825 Company-furuksi n sean h arxl development 1,155 1,155 1,194 1,194 1.300 1,300 Maintenance anxiic;xiirs 839 839 840 840 803 803 Social Security taxes 751 68 819 727 69 796 715 43 768 Rental expense 700 160 860 657 123 780 564 68 632 Advertising 413 66 479 495 5:

546 481 24 505 Taxes,except Social Security and those on innime 374 77 451 289 82 371 288 28 316 q

50

Note 7 PensionsandOtherRetireeBenefits future service perioci of employees. Prior-senice cost for changes in pension benefits which are alk) cable to previous GE arulits affiliates sixmsor a numin of pension arxl periods of senice are amortized in the same manner, other retirce bendit plans. This note summarizes impor-

. Actuarial assumptions for the principal pension plans tant financial aspects of GE's obligations for these plans.

include 8.5% forInth :he assumed discount rate used to

!&asurements of obligations and costs are based on actu-detennirr the present value of future benefits and the arial calculations involving various assumptions as to expected long-tenn rate of return on plan assets. The future events.

assumed rate of average future increases in pension bene- -

fit annpensation is 6.5E Principalpension plans Employer costs for the principal pension plans in 1988 The principal pension plans are the GE Pension Plan (GE reu>gnized the impact of plan design changes in 1988 and Plan) arxl the GE Supplementary IYnsion Plan (Supple-continued favorable investment performance. Details of mentary Plan). The RCA Retirement Plan (RGA Plan) was cost for the principal pension plans follow.

merged with the GE ltnsion Plan at the erxl of 1988.

Amounts arx1 comments about the GE Plan in this note

$$,QnC3 alpensionplans i P include the RGA Plan frumJune 1,1986. Other pension plans are s;x>nsored by domestic arxl foreign afIiliates, but nerrfit cost for senice during the these are not considered to be significant individually or in

{Q,I *"'pkqec

$ 300 $ 385 $ 349 the aggregate to GE's fmancial posmon.

Interest cost on pmjected benefit The GE Plan covers substantially all employees in the obligation 1,232 : 1,187 1,074 _

United States, including approximately 50% of GEFS

[uj[nuin plan assets 0;

O O

employees. Generally, benefits are based on the greater of 3,

mion cost

$ (P27) $

25 $ 143 a formula recogmzmg career eanungs or a fonnula recog-nizing length of senice and final average camings. Bene-

' U"j il8],I'C'"""',"[j,",7t

$ 2,261 $ 1,237 $ 2,739 fits are furuled through the GE Pension Trust. At the end Recognized remrn on plan assets 0,460) 0.293) 0.067) of 1988, appmximately 218,900 cmplayees were covered, Unrecognizalreturn on plan assets S 80I $ (56)$1.672 approximately 118,000 former employres with vested rights were entitled to future benefits arxl approximately Beginning in 1989, etaployee contributions ($147 mil-

{

149,300 retin es or beneficiaries were receiving benefits.

lion for 1988) will no longer reduce benefit awts as contri-The Supplementary Plan is an unfunded plan providing butions will be used to provide additional pension benefits.

supplementary retirement lenefits primarily to higher-Recognized return on plan asse:s is determined by level, longer-senice management and pmfessional applying the expected long-term rate of return to the mar-employees in the Unital States. At the end of 1988, about keorelated value of assets.

3,600 employres were eligible for this plan, and about Funding policy for the GE Plan is to contribute amounts 3,900 retirees or benchcianes were nremng lenefits.

sufficient to meet minimum furxling requirements set GE adopted Statement of Financial Accounting Standards fonh in U.S. employee benefit and tax laws plus such addi-(SFAS) No. 87 for pension accounting cifectiveJanuary 1, tic,nal amounts as GE may detennine to le appropriate 1986. SFAS No. 87 rajuists use of the pn jected unit credit fmm time to time. GE made no contribution in 1988 cost method to determine the pmjected benefit obligation because the funding str.us of the GE Plan precluded cur-i i

anxi plan cost, %e pnjected benefit obligation is the actu-rent tax dectuction and would have resulted in an excise I

arial present value of the portion of pmjected future bene-tax.

fits that is attributal to employee senice to date. ne The funding status of an ongoing plan may be meas-lenefit cost Ior senice during the year is the portion of the ured by comparing the market-triated value of assets with pmjected lenefit obligation that is attributed to employee the projected benefit obligation. The market-triated value senice during the year.This cost methex1 recognizes the of assets is based on amortized cost plus recognition of clTnt of futurr compensation arxl senice in projecting the market appreciation and depreciation in the portfolio over j

futuir benefits, and it had been usal Ior the GE Plan five yem. GE believes the market-related value of assets is befotr adoption of SFAS No. 87.

a more realistic measm e than current fair market value in addition, SFAS No. 87 establishes a " transition gain."

because the market-related vahic reduces the impact of This is the excess atJanuary 1.1986 of the current fair short-tenn market fluctuations. The funding status for the market value of plan assets over the plan's pmjected bene-principal pension plans Iollows.

fit obligation.Tlus transmon gam is being amortized over i

Funding status for principal pension plans 15 years exwpt that such excess for the RCA Plan was hmter 3i On mhne 1988 1987 recognizal as an asset in accounting for the RCA acquisition.

Mar ket-rrlated value of assets

$19,308 $17,663 Gains arxl losses that occur lecause actual experiern e NecmNne Manon 15,473 15,494 ditTeis imm that assumed air amonimi over the average 51 I

A schedule ren>nciling the projected benetn oQCon N:ts 8 Intsrset end Othsr Financial Ch:rges for princi xd pension plans with GE's recorded pension l

liability is shown below.

GE, Interest capitalized, principally on major property, o' lant and equipment projects, m $11 million in 1988, l

Reconciliation of projected benefit obligation with pension lisbility for principal pension plans

$23 imlh.on m 1987 arxl $38 m. lu.d m m. 1986.

Dn ember 51 (In millions) 1988 1987 GEFS. GEFS interest and discount expense re[x>rted in the Projected beneht obligation 515,d73 515.491 Statement of Earnings is net ofinterest income on temIx>-

1. css current fair maiLet value of trust assets (21,502)(?0.088) rary investments of excess fuixls ($285 million, $ 165 mil-Unreuignimi SI'AS No. 87 transition gain 1,847 2.000 lion and $53 million in 1988,1987 and 1986, respectively) r r rt < ri ir t ; i rue gains 3,3b 2, i

""d Capitalized interest of $ 16 million, $4 million and Unrecognimi prior-service cost 1I4 (265)

$8 imllion, respectively, for 1988,1987 atxl 1986.

(

Reunde i prepaid pension assets 1.177 573 Recorded pension liability

$ 412 $ 379 Note h GEFS AllowanceforLosseson The portion of the pn>jected benefit obligation repre.

Financing Receivables senting the accumulated benent obligation amounted to

$14.073 million and $13,176 million at the erxl of 1988 GEFS allowance for k>sses on financing receivables repre-and 1987, respectively, and the vested benefit obligation sented 2.63% and 2.59% of total financing receivables at was $ 13,895 inillion and $ 12,835 million at the end of year-ends 1988 atul 1987, respectively. The table below 1988 and 1987, respectively. These amounts are based on sims the activity in the allowance fi>r losses on financing compensation azul service to date.

receiv bles during 1986 through 1988.

Trust assets consist m iinly of conunon st<x k and fixed on milliom>

1988 1987 1986 income investments. Included at year-end 1988 was GE 8

conunon sto< k valued at $139 million held in connection

{', ;["'j"",""[d 9 mium with an mdexed lmrtfi>ho.

Net transfers related to companies Other umecognized net experience gains resulted prin-acquired and sold 89 21 14 cipally from favorable investment pet li>rmance.

Amounts written off (294)

(17I)

(461)

Unrecognimi prior-senice cost includes the effect of flalame at December 31

$ 972

$743 $603 January 1,1988 benefit inricases to GE pensioners and 1988 benefit changes affecting active employees.

Amounts written offin 1988 were approximately Principal retiree health care and life insurance plans 0.81% of average financing receivables outstanding during the year, compared with 0.629 and 2.02% of average G. E.and.its affiliates sponsor a number of plans provid.mg Gndcing receivables outstanding during 1987 and r etiree health car e and life insurance benehts. G E's aggre-1986, respectively.

gate cost for the principal plans, which cover substantially all employees in the United States, was $302 million in 1988, $278 million in 1987 and $84 million in 1986. The Note 10 ua===aiexa a -

costs fi>r 1988 ami 1987 were significantly higher than for 1986 due to favorable nonrecurring changes in 1986 when GE. Unusual expenses in prior years were provisions fi>r the assumed discount rate used to determine the present corporate restructuring- $1,027 million in 1987 aml value of future life and health benefits was increased.

$311 million in 1986. These were for the expenses of refiw Generally, employecs who retire after qualifying fi>r cusing a wide variety of business and marketing activities optional early retirement umler the GE Plan are eligible to and irducing fi> reign and domestic risk exposures. These participate in retiree heahh care and life insurance plans.

provisions include costs of rationalizing and improving a iIcahh care benefits fi>r eligible retirees under age 65 and large number of production facilities; rearranging produc-cligible dependents are included in costs as covered tion activities among a number of existing plants; aixl expenses are actually incurred. For cligible retirees and reorganizing, phasing out or otherwise conduding other spou.,es over age 65, the present value of future health activities no longer considered essential to the conduct of care benefits is funded or accrued and is included in the Company's business.

costs in the year the retiree becomes eligible for benefits.

.Fhe present value of. future life insurance benefits for ch.-

GEFS. GEFS had provisions of $91 imlh.on m 1987 for gible retirees is funded ami is included in costs in the year

"""'""I '*P'"*** ".*I twructur ng activities, including amounts related to msider trading charges and business of retirement.

Most retirees outside the United States are covere I restructuring activities of Kidder, Pealxxly.

by government health care programs, and GE's cost is not significant.

h 52

Note } } Provision forIncome Taxes (excluding 1987 extraordinary item and cumulative effect of changes in accounting principles)

Provision forincome taxes 1988 1987 1986 On millions)

GE GEFS Total GE GEFS Total GE GEFS Total Estimated amounts payable (recoverable)

$1,311 $ (32) $1,279

$1,246 $ (212) $1,034

$1,358 $ (831) $ - 527 Deferred tax expense (benefit) from "temjxirary differences" (152) 274 122 (71) 231 160 (120) 656 536 Investment credit defe:Ted (amoitized)- net (63)

(3)

(66; (87) 1 (86)

(38) 2 (36)

Effect of t hange in tax-rate assumptions for leveraged leases (392)

(392)

$1.096 $ 239 $1,335

$1.088 $ 20 $1,108

$1.200 $ (565) $ 635 e " Estimated amounts payable" includes amounts Items making up deferred U.S. federal income tax pro-applicable to foreignjurisdictions of $344 million, visions are substantially different in nature for GE except

$197 million and $198 million in 1988,1987 and 1986, -

GEFS arxl GEFS. Accordingly, the principal" temporary l

respectively.

difference" items are summarized separately in the l

e General Electric Company files a consolidated U.S.

following table, federal income tax return that includes GEFS. GEFS' pro-Deferred income tax expense (benefit) l vision for estimated taxes recoverable includes its effect on from temporary differences t ic consolidated tax return.The amount of taxes recover-(In millions) 1988 1987 1986-l able as reported by GEFS has been reduced to the extent GE except GEFS ofconsolidated investment tax credit carryforwards of Tax over lxx>k depreciation 5 34

$ 18

$ 87

$168 million and $275 million at December 31,1987 and Margin on installment sales (4)

(16)

(33) 1986, respectively, investment tax credit carryfonvards of Prmision for warranties (149) 9 (27) l

$168 million and $107 million realized in 1988 and 1987,

$',',h5I ",fj'[P*"'I "5 gh f.]

)

respectively, were rellected as reinstatement? of deferred 052)

(71) 0 20) tax balances.

GEFS

• Defermiincome taxes reflect the impact of" tempo-Financinglease income 287 338 573 mry differences" between the amount of assets and liabili-Dc4 erred commitment fees 2

15 (11) t nd ses (4) 16 28 ties for financial re[xirting purposes and such amounts as mn t e,x incasured by tax laws and regulations. Fhese "tempomry adjustments ofinsurance differences" are detennined in accordance with Statement afhliates (75)

(30) 33 of Financial Accounting Standattis No. 96 (see note 1)

Financinglease income of I

e oint ventures commenging in 1987 and are more inclusive in nature g j"[]'

than " timing differences as determmed under previously Depreciation of buiHings and -

l applicable generally accepted accoundng principles.

equipment (2)

(24) 13 l

i l

Deferred income taxes for 1986 have not been restated.

Operating leases (58)

(27)

(28) l Tax transfer leases 7

(29) 26 Provision for losses (65)

(106)

(74)

Earnings of associated companies 29 4

5 Tax credit carryforwards recognized as reinstatement (reduction)of delerred income taxes 168 107 83 Other-net (21) -

(24)-

5 274 231 656

$122

$160

$536 l

"Other-net" includes the tax elTects of a number of temporary differences such as those related to various por-

)

tions of transactions involving business dispositions and restructuring expense provisions.

t S3 l

.. I

i l

o The U.S. investment tax credit (lTC) was repealed, A reconciliation from the consolidated provision for i

with some t transitional exceptions, effectiveJanuary 1, income taxes that would have resulted using the U.S. fed-I 1986. Ilowever, because ofits use of the deferral metluxi eral statutory rate to the actual provision is shown below.

of accounting fijr the l'IC, GE has an unamortized balance Differences between expected U.S. federal statutory remaining. As a result of the accounting change m 1987, tax-rate provision and actual tax provision unamorti/cd ITC is treated.n a temporary dif ference for (in millions) 1988 1987 1986 deferred tax accounting. GE's remaining unamortimi l'IC Expected consolidated tax balance was $119 million, net of defermi tax at year-end provision at statutory rates

$1.605 $1,291 $1.438 1988, and will be added to income in future years.

Increase (reduction)in taxes

• See note 5 for further information about the 1986 resulting from GE I"

effect of change in tax-mte assumptions f or leveraged

,'r i

d leases.

cumulative effect of accounting

• The U.S. federal statutory tax rate on corporations (hange)in before-tax income on an aftem x hasis (268)

(921)

(232) was 34% in 1988, down from 407c in 1987 and 46% in

\\,arying tax rates of other 1986.1)ata alx mt "effi ctive tax rates,".i.e., provision Ihr affiliates (principally foreign)

(115)

(117)

(80) l income taxes as a percentage of earnings before incorne Amortization ofinvestment tax credit (70)

(88)

(87) taxes, extraordinary item atxi cumulative effect of I"'" *C' "'5"'C"P'"I "I""'"

(I8)

(54)

I 8 accounting changes,Ibilow.

Varying rates on unusualitems 5

(14)

Effective tax rates (before extraordinary item and cumulative Current-year effect of income tax effect of accounting changes) accounting (hange 133 1988 1987 1986 All other-net 25 91 (31)

(42H)

(195)

(498)

GE 21.5% 33.9 % 32.5%

Increase keductionHn taxes GEFS 23.3 3.5 (a)

Consolidated 28.3 34.3 20.3 resulting from GEFS Amortuauon ofinvestment tax (a) Calculation of an effective tax rate for 1986 is not meaningful for credit on financing and GEFS, whit h sustained a pre-tax loss of $6I million in that year arul operating leases (17)

(27)

(17) had a medit tax provision of $565 million. A signilitant factor in Dividernis received w hich are not gel S' 1986 operations was a required < hange in tax-rate assumP-fully taxable (17)

(13)

(20) tion for leveraged leases in accordam e with the Tax Reform Act of Income from tax-exempt 1986 as discussed in more detailin note 5.

marketable securities (101)

(112)

(108)

Income taxes at capital gains rate (14)

(41)

Fresh-start provision of insurance af filiates (22)

Change in tax-rate assumptions for leveraged leases (note 5)

(14)

(31)

(357)

All other - net G1 (12) 6 (110)

(209)

(537)

Eliminations 268 221 232 Actual consolidated tax pmvision

$1,335 $ 1.108 $ 635

• Provision has been made fbr U.S. federal income l

taxes to be paid on that portion of the undistributed earn-ings of afTiliates and associated companies expected to be j

remitted to the parent company. Undistributed earnings intended to be reinvested indefinitely in afIlliates and asso-ciated companies totaled $ 1,097 million, $ 1,318 million and $1,063 million at the etxl of 1988,1987 atxl 1986, respectively. It is estimated that fmeign tax credits would approximately offset the U.S. taxes payable if these earn-ings were to be distributed.

• Based on the hication (not taxjurisdiction) of the business providing gtxxis or senices, consolidated domes.

tic income belbre taxes, extraordinary item and cumulative effect of changes in accounting principles was $3,936 mil-lion in 1988, $2,710 million in 1987 and $2,516 milli:>n in 1986. The corres[xmding amounts for foreign-based oper-ations were $785 million, $517 million and $611 million in each of those years, respectively.

54

I Nota } } Cash

{ h GEinetwin Nc%

Deposits restricted as to usage arxl withdrawal or usal as nber 31 (In millions) 1988 1987 partial compensation for short-tenn lx>rrowing anange-raents wert not material for either GE except GEFS or Raw materials and work in piucess

$ 5,603

$ 5,515 GEFS. See notes 22 arxl 26 for related information about Finished go<xis 2,863 2,546

• 5"*"l*

credit lines and compensating balances.

8,712 8,341 l

Less revaluation to LIFO (2,226)

(2,076)

Note } } MarketableSecuritiesCarriedat LIFO value ofinventories

$ 6,486

$ 6,265 Cost LIFO revaluations increased $150 million in 1988 pri-Carrying value of marketable securities for GE except marily because of price increases. LIFO revaluations GEFS was substantially the same as market value at year-increased $324 milhon,m 1987, mostly related to the crxis 1988 arul 1987. Market value of GEFS' securities car-acc unung change described in note 1, but decreased rial at amortized cost was $5,537 million and $4,592 mil-

$104 million in 1986. Included in these changes were lion at December 31,1988 arxl 1987, respectively.

decreases of $23 million, $22 million and $51 million (1988,1987 and 1986, respectively) due to lower inventory levels. h.1988 arxl 1987, there was a net current-year price Q GEFS Marketable Securities Carried increase but in 1986 there was a price decrease. Atx>ut Note at Market 86% of total inventories is valued using the LIFO method ofinventory accounting.

December 31 (In millions) 1988 1987 U.S. government arxl federal agency securities

$2,433

$1,822 State and municipal securities 215 426 Corporate stocks, bonds and foreign securities 2,441 1,752

$5,089

$4,0(X)

At December 31,1988. the carrying value of equity securities carried at market value included unrealized gains arxl unrealized losses of approximately $19 million and $30 r. 41 ion, respectively.

A signi! 'nt lxntion of securities carried at market value at Ik tinber 31,1988 was pledged as collateral for bank kxms arxl repurchase agreements. Iri addition, Kid-der, Pealxxly bonuws and lends seemities to obtain financ-ing and to facilitate the securities settlement process.

Nate 15 asc rr #ta c iv 6' -

Ikvember 31 (in millions) 1988 1987 Receivable from:

Customers

$5,289

$5,463 Associated companies 160 155 Others 1,857 1,374 7,306 6,992 less allowance for losses (196)

(210)

$7.110

$6,782 55

v

=

] 7 Winrnci@:csivsbiss (invsetment in tima salas, loans and fintncing Isrses)

Nsts e " Time sales andloans" represents transactions in a Det ember 31 (In millions) 1988 1987 variety of forms,. duding time sales, revolving charge m

Time sales and loans and credit, mortgages, installment loans, intermediate-Commercial real estate financing

$ 7,114

$ 6,131 term loans, and revolving loans secured by business assets amj rn ndauirily redeemable preferred stock.The portfo-tail r

Ilonx arxl retreatiori financirig 1,888 2,011 I o includes time sales arxl loans carTied at the principal Equipment sales financing 1,826 1,502 amount on which finance charges are billed periodically, other 1,208 1,126 and time sales arxlloans acquired on a discount basis car-26,770 19,560 ried at gross lxx>k value, which includes finance charges.

_,l.000)

(

IkierTed income (983) l$

e "I,inancing leases" consists of direct financing and c

25.787 18,560 leveraged leases of aircraft, railroad rolling stock, automo-biles and other transportation equipment, data processing Investmentin financing leases Direct financing leases 8,433 7,410 equipment, medical equipment, and other manufacturing, Ieveraged leases 2,691 2,704 power generation, mining and commercial equipment and i1.124 10,114 facilities. As the sole owner of assets under direct financing 36,911 28,674 leases and as the equity participant in leveraged leases, Irss allowance for losses (972)

(743)

GEFS is taxed on totallease payments received and is enti-

$35.939

$27,931 tied to tax deductions based on the cost ofleased assets and tax deductions for interest paid to third-party participants.

GEFS also is entitled generally to any investment tax credit on leased equipment and to any residual value ofleased assets. Investments in direct financing and leveraged leases represent unpaid rentals and estimated unguaranteed g

trsidual values of leased equipment, less related deferred 1

income arxl principal and interest on notes and other instruments representing third-party participation.

f Because G EFS has no general obligation on such notes and other instntments representing third-party participa-tion, such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. GEFS' share of rentals receivable is subordinate to the share of the other participants who also have a security interest in the leased equipment.

Additional detail ofinvesunent in financing leases at December 31,1988 and 1987 is shown below.

Investment In financing leases Direct Total financing leases i.everaged leases financing leases December 31 (in millions) 1988 1987 1988 1987 1988 1987 Total minimum lease payments receivable

$10,109

$ 8,660

$10,745

$11,171

$20,854

$19,831 less principal and interest on third-party nonrecourse debt (7.893)

(8,361)

(7,893)

(8,361)

Rentals irteivable 10,109 8,660 2,852 2,810 12,961 11,470 Estimated unguaranteed residual value ofleased assets 1,102 853 817 855 1,919 1,708 less deferred income (a)

(2,778)

(2.103)

(978)

(961)

(3,756)

(3,064)

Investmentin financing leases 8,433 7,410 2,b91 2,704 11,124 10,114 Irss allowance for losses (121)

(165)

(74)

(137)

(195)

(252)

Irss deferred taxes arising from financing leases (1.218)

(940)

(2,406)

(2.397)

(3,624)

(3,337)

Net investment in finxnciq leases 5 7,094

$ 6,355

$ 211

$ 170

$ 7,305

$ 6,525 a) Total fman< ing lease deferred income is net of defened initial direct costs of $33 million and $ 17 million for 1988 and 1987, respectively.

s 4

E 56

Experience has shown that a substantial portion of

$26,019 million and $19,914 million, respectively, and the receivables will be paid prior no contractual maturity.

ratio of cash collections to average financing receivables Accordingly, the maturities of time sales arx1 loans and was 72.5% and 72.8%, respectively. Contractual maturities rentals rec eivable at December 31,1988 shown in the table of time sales and loans and rentals receivable at Decem-below are not to be negarded as forecasts of future cash ber 31,1988 are shown in the fbliowing table.

collections. During 1988 arul 1987, casli collections were Contractualmaturities 1991 on millions)

Total 1989 199n 1991 1992 1993 arul after Time sales and loans Cannmercial ical estate financirig

$ 7.114 89

$ 240

$ 432

$ 1,009

$ 2,036

$ 3,308 Cannmercial and imlustrialloans 7,269 1,305 761 1,007 716 65H 2,822 Retailer financing 7,465 5,360 1,705 347 30 13 10 Ilome arul recreation financing 1,888 744 154 140 125 114 611 Equipment sales knancing 1,826 618 505 326 195 111 71 Other 1,20H 257 188 59 52 42 610 26,770 H,373 3,553 2,311 2,127 2,974 7,432 Rentais receivable Dire t financing! cases 10.109

?,683 2.197 1,505 1,183 664 1,877 Irveraged leases 2,852 74 119 138 148 154 2.219 12,961 2,757 2,316 1.643 1,331 818 4,096

$39,731

$I 1,130

$ 5.869

$ 3.954

$ 3,458

$ 3,792

$11,528

} h Other GEFS Receivables from and

{ h Property, Plant and Equipment Note Note Payables to Brokers and Dealers (including equipment leased to others)

Included in other receivables arxl other liabilities of GEFS are amounts receivable from and payable to brokers and Iw ember 31 on millions) 1988 1987 dealers in connec tion with Kidder, Pealxxly's normal trad-ing, lending and lxurowing of securities. At Decemher 31, originalcost 1988 and 1987, amounts consisted of the fbliowing.

GE 1.and and im[nuvements

$ 260 $ 232 i et ember 31 (in millions) 1988 1987 Iloildings, struct ures arul related equijnnent 4,250 4,127 included in other receivables Ma(hinery and equipment 12,957 12,616 Set urities failed to deliver

$ 132 $ 220 1.caschold costs and manufacturing 1)eposits paid for securities honowed 1,226 1,388 plant und: ! construction 1,126 796 Otfier, principally (learing organizations 32 59 Oil and ga

crties 764 80I

$ 1,390 $1,667 19,357 18,572 included in otherliabilities GEFS Securities failed to receis e

$ 451 $ 198 Iluildings and,quipment 745 485 Deposits received for set urities loaned 903 1,056 Equipment leased to others Ot her, principally (learing organizations 48 74 Vehicles 1,564 1,668 Railroad rolling sto( k 1,038 907

$ 1,402 $ 1,328 afarine shipping tontainers 857 513 Aircraft GlH 216 Data pmcessing equipment 355 345 Other 631 408 5.8 I I 4,512

$25,168 $23,114 Accumulated depreciation, depletion and amortization GE

$ 9,997 $ 9,317 gel'S 1.560 824

$11.557 $10.14 i GEFS' accumulated amortization of equipment leased to others was $1,321 million and $658 million at Decem-ber 31,1988 atxl 1987, respectively, Amortization during 57

1988,1987 arxl 1986 was $665 million, $316 million aml Nata ] { AllOthtr Arsets

$327 million, respectively.

At December 31,1988, GE except GEFS had minimum m.ccmh.r 31 on inillions) 1988 1987 rental conunitments uruler rioncaru elable openitirig leases GE aggregating $3,058 million. Am<>unts payable over the I"\\""['[l mmpanies (induding next f ve years are: 1989- $152 million; 1990- $410 mil-lion; 199I - $367 million; I992 - $320 million; and 1993 -

uivances of $29 million aixl

$270 :nillion.

$45 million)

$ 647 $ 826 At December 31,1988, GEFS had minimum rental hiiscellaneous investments (at wst) cormnitments utuler ex>ncaru elable operating leases aggre-

'll

.';{;[*""'"

j 202 169 gating $787 million. Amounts pay able over the next five Other 175 631 years are: 1989- $134 million; 19!K)-$112 million; 1991 hlarketable equity securitits 72

!K)

- $95 million; 1992 - $65 million; arx1 1993 - $55 million.

Funds held for business development 81 less allowant e for losses (100)

(75) 996 1,722 Prepaid pension assets 1,177 573 l

Note % intang.ble Assets Recoverable engineering costs on i

government contracts 752 791 npterm receivables 675 569 Dec emler 31 On ruillions) 1988 1987 Television program msts 352 480 GE Deferred charges 318 416 (k xxlwill

$6,423 $3,820 Real estate development projects 73 130 Other intangibles 561 610 Customer knancmg e3 71 Other 205 144 6.984 4.430 4.621 4.896 GEFS Quxlwill 1,361 1,106 GEFS Other intangibles 204 212 Investment in associated companies (induding advances of $389 million I'M8 I'3 I 8 and $184 million) 1,145 755

$8,552 $5.748 Miscellaneous investmer>ts (at cost) 393 143 Ilroker-dealer cash anxi securities Accumulated amortization of GE's g(xxlvill was ggy;;[t r rN tisitioncosts l

2

$318 million and $301 million at December 31,1988 arxl Deferred charges 225 182 1987, respectively. Acctunulated amortization of other Real estate properties 122 82 intangibles for GE was $ 155 million and $365 million at Other 888 266 1

December 31,1988 and 1987, respectively. The largest GE 3.4 I 8 1.705 go<xlwill and other intangibles were from the RCA acquisi.

$8.039 $6.601 tion, for which gmxiwill is being amortized on a straight-line basis over 40 years. The increase in gmxiwill since For GE, the estimated realizable value of miscellaneous December 31,198 e was mamly from acquisitions of Roper investments was about the same as cost at year end.The Cor}x> ration, llorg-Warner's chemicals businesses arxl aggregate market value of marketable equity securities, WlVJ-Miami, and final valuation of CGR assets. These which are canied at cost, was $72 million arxl $86 million balan(es also are being amortized over 40 years. All other at year-ends 1988 and 1987, respectively. Gross unrealized GE int;mgibles and goodwill are being amortized over gains and losses were each $15 million at December 31, shorter periods as appropriate, ranging from one year to 1988.

20 years.

The National Broadcasting Company (NilC, an affiliate Accumulated amortization of GEFS' gmxiwill was of GE) capitalizes program costs (including rights to

$133 million aixt $82 million at December 31,1988 and bmadcast) when paid or when a pmgram is ready for 1987, respectively. Accumulated amortization of GEFS' broadcast, if earlier. These costs are amortized based u}xm other intangibles was $73 million and $56 million at projected revenues or expensed when a program is deter-December 31,1988 amt 1987, respectively. The increase in mined to have no value.

GEFS' gaxlwill since December 31,1987 represented pri.

At year-end 1988, NBC had approximately $1.24 billion marily goodwill :rlated to auto auctioris }neviously not of coinmitinents to acquire br otulcast material or the rights consolidated and gomlwill arising from the acquisitions of to bmadcast television pmgnuns that require payments Gelco and MW Credit Operations. GEFS' intangible assets over the next five years.

are being amortiecd over various perimis not longer than 30 years. GEFS' other intangibles represent principally the value ofinsurance-in-force related to Employers Reinsur-ance's pmperty and casualty reinsunmce business, which is being amortized on a straight-line basis over its estima&d life of approximately 16 years.

ss

s N:ta )) Shsrt-TarmCerrowings Nots [ Accounts Peyzbla Amount and average rate at December 31 December 31 On millions) 1988 1987 198N 1987 GE Un millions)

Amount Rate Arnount Rate Trade accounts

$1,939 $2.105 Collected for the account of others 180 279 GE Other 17

?31 Notes with trust 2,136 2.615 departments

$ 337 8.59

$ 320 6 6'X Afhliate bank GEFS g,,ngw;gg, Accounts and drafts payable 4.132 3.329 (principally fiereign) 261 25.7 364 35.2 Eliminations (264)

(216)

Other,ituluding

$6,0(H $5.728 curtent portion of long-term honowings 1.263 426 1,861 1,110 GEFS Note %- GEFS Securities Sold but Not Yet Onnmern. l p y>cr 24,591 9.32 18,790 7.77 a

A flanks 1,987 J.31 1,650 8.11 Purchased, at Market Cunent portion of long-ter m borrowings 790 1,118 Notes with trust g3y,.cmber 31 On millions) 1988 1987 departments 990 8.48 965 6.78 Passlxx>Ls atu!

U.S. government and federal agency securities

$l 500 $1,000 mvest ment State and municipal securities 9

16 certificates 373 325 Q>r[xirate st<x ks, lumds and foreign 28,731 22.818 securities 519 391 Eliminations (170)

(85)

$2.088 $1,407

$30.422

$23.873 The average balance of short-tenn lx>rrowings fbr GE except GEFS, excluding the current portion oflong-tenn Note 25 GE AllOtherCurrentCostsand lx>rrowings, was $1,416 million in 1988 (calculated by Expenses Accrued averaging month-end balances fbr the year) compared with an average balance of $1,492 million in 1987. The At year-ends 1988 and 1987, this account included taxes maximum balances in these calculations were $2,444 mil.

accrued f $1,568 million and $1,382 million, respectively, lion at the end of September 1988 and $2,048 million at

""d C"".ipensation and benefit accruals of $982 million and the end of lnne 1987. The average worldwide elTective

$777 nnHum, respectively. Also included are amounts fbr interest rate fbr the year 1988 was 15%; (br 1987, it was pn> duct wananties, estimated costs on shipments billed to 13%. These average mtes represent total short-tenn inter-cust uns and a wide variety of other sundry items.

est incun ed divided by the average lulance outstanding.

Although the total unused credit available to GE through banks and commercial ctedit markets is not readily quanti-fiable, confinned credit lines of atx>ut $1.3 billion had been extended by 48 banks at year-etxt 1988. Substantially all of Ihese litx s also are available for use by GECG and GEFS in addition to their own a edit lines (see note 26).

The average daily balance of GEFS' borrowings, exclud-ing the current pmtion oflong-tenn lx>rrowings, was

$27,889 million in 1988 compared with $20,I47 million for 1987. The December 5,1988 balance of $30,385 mil-lion was the maximum balance in 1988. The October 21, 1987 balance of $23,463 million was the maximum bal-ance in 1987. Thc average short-tenn interest mte, exclud-ing the current lxntion oflonu-tenu debt, was 7.9'i% lbr 1988, representing -

....terest expense divided by w

the average daily balance, compared with 7.25% for 1987.

59

B Nets % Leng-Tcrm Borrowings Det emlwr 31 (In milhons) 1988 1987 GE

$ 4,330 $ 4,491 GEFS 10,862 8,037 Eliminations (110)

(1 l}

$15,082 $12,517 Outstanding balances in long term bonuwings for GE at December 31,1988 and 1987 are as follows.

GE long-term borrowings I

Dn emler 31 (in milhons) 1988 1987 7%% Notes Due 1989

$ - $ 500 (a) The Company has entered into certain contracts which resuh in a 6%% Notes Due 1989 500 fixed UA dollar interest cost oi7.679.

12%% Australian Dollar Notes Due 1989 (a) log 0-) Dein originally incurred by RCA but for which GE is now the oh M Pn!igyr.

16%% Notes Due 19871989(b) 35 P'"" C""""'I "" " I" '"""*'" gin rate) denonu,nated in Eu nd napal arxHnterest (7% cou 5%% Notes Due 1972-1991 13 19

"" *"h U"' * "**

6%% Notes Duc 1991 500 500 mio a,Jananese yen cunency and interest-rate swap agreement 7%% Eunstollar Notes Due 1991 300 300 under wldch GE assumes a fixed yen liability (22,262 million) for 5.30% Sinking Fmul Detentures Due payment of principalis 1992 and pays interest in yen to the 1973-1992 28 34 commercial bank counterparts at somewhat below the six-month 12%% Notes Due 1992 (b) 100 100 1.lBOR yen rate.

7% Notes Due 1992 250 250 (d) Notes are yen 35 billion at a fixed exchange rate of yen 180.41 =

SUS l 00-7% ger cent, Notes Due 1992 (c) 178 (c) lnduding anmnization of original issue discount, the effectis e 5%% Eum-yen Notes Due 1993 (d) 194 191 N "".cnest rates areM%% notes-7.41%,2%% not

"".nated in UA 4%% Eunslollar Discount Notes

"" P"I ""'""'C'(Y# '

Due 1993 (c)

')00

')00 is mue GE entered mto currency 1

9%% Notes Due 19173 (f) 528 aixt interest rate swap agreements under whic h GE assumes (1) a 1

2%% Discount Notes Due 19!)4 (e)(g) 150 150 fixed Dutch guilder liability (632 million) and (2) a fixed German 7% Euro-dollar Extendible Notes mark liability (373 million) foi payment of principalis 1993 and Due 1998 (b)(i) 200 200 pays interest in the respective currencies to the commercial bank 8%% Ik4sentures Due 1985-2004 217 217 counterparts at somewhat below the respective currency three-84 Eunslollar Extemlible Notes month LIBOR rate.

Due 2006(i)( j) 300 300 (g) A u upanied by sale of 3,570,000 warrants ex iring December sharemybas ananged for options on its stock m, at MM u I, M d se sham on mnumn sw t

7%% Eunslollar Exteinlible Notes order to pre-Due 2006 (i)(L) 300 300

" #""Y

"""I""""**""*"I'h***"*"

8%% SinkinK und Ikirntures Due 2016 300 300 F

(h) Interest rate subject to annual adjustment at the Company,s industnal development lxnxls 262 225 option irginning in 1989.

All other 310 59 (i) At annual rate adjustment dates, notes are redeemable in whole

$4,330 $4,491 or in part at the option of the Company or repayable at the opuon of the holders at face value plus accrued interest.

(j) Interest rate subject to annual adjustment at the Company's option beginning in 1993.

(k) Interest rate subject to annualadjustment at the Company's option leginning in 1991, "All other" includes original issue premium and dis-

$1,233 million in 1989, $51 million in 1990, $824 million counts, an adjustment to bring RCA lx>rrowings at actluisi-in 1991, $572 million in 1992 and $952 million in 1993.

tion date to fitir maiLet value, atul a vaiiety oflxwrowings These amounts are after deducting debentures which by alliliates and [xu ent comimnents with various interest have been reactiuired for sinking-fund needs.

rates and maturities.

long-tenn borrowing maturities during the next five years, including the Ix>rtion classified as current, are 60

Outsuuxling balances in long-term borrowings for GEFS at Decernber 31,1988 and 1987 are as follows.

GEFSlong term borrowings thernber 31 (in miUions) 1988 1987 Senior Master notes (a)

$ 181 5 187 (a) Notes have a wiing 13-month or 15-month maturity arxl bear 6.39% Notes Due 1990 (b) 50 50 interest based principally on GE Capitars I80-day ol>en-market 6.51% Notes Due 1990 (c) 72 72 notes.

8% Notes Due 1990 100 100 (b) Principalamtinterest(15.00% coupon rate)denominatedin 8.125% Notes Due 1990 100 100 Australian dollars. In connectica with this issue, GEFS entered 8.875% Notes Due 1990 200 200 into a U.S. dollar currency and interest-rate swap agreement 10% Notes Due 1990 200 urwier whic,h GEFS assumes a fixed U.S. dollar liability for pay-I.nncipal in 1990 and pays mterest m UX dollars to the 7.75% Notes Due 1991 250

"'C"'

P 8.25% Notes Due 199I 600

' "((["""'""

"'""'"'P""I "'

9.75% Notes Due 1991 98 100 (c) Prindpal and interest denonunated in New Zealarxl dollars. Cou-11% Notes Due 1991 200 pon interest is 260 basis gxiints below the New Zealand 90-day 12.75% Notes Due 1991 126 150 bank bill rate reset quarterly. In connection with this issue, GEFS 13.625% Notes Due 1991 150 entered into a U.S. dollar currency and interest-rate swap agree-7.125% Notes Due 1992 250 250 ment under which GEFS assumes a fixed U.S. dollar liabdity for 8.75% Notes Due 1992 300 300 pay ment of principat in 1990 and pays interest in U.S. dollars to 8.75% Notes Due 1992 250 the aininieniaDiank usunterparty at 6.51% on the U.S. dollar 9.50% Notes Due 1992 250 250 uIted to yield 14.39're.

(d)

Zetu Coulum Notes Due 1992 (d) 357 400 9% Notes Due 1993 1,000 (e) Principal arxlinterest denominated in Canadian dollars. In con-nection with this issue, GEFS entered into a pound sterling cur-10.25% Notes Due 1993 (e) 143 rency and interest-rate swap agreement umler which GEFS Zero Cou[mn Notes Due 1993 (d) 374 400 assumes a fixed pound sterling liability for payment of principal Zero Coupon Notes Due 1991(f) 171 200 in 1993 and pays a floating rate ofinterest in pound sterling to 12% Notes Due 1994 117 200 the commercial bank counterparties.

9.5% Notes Due 1995 300 (f) Discounted to yield 14.47%.

Zero Coupon Notes Due 1995 (f) 432 500 (g) No stated maturit) date. Issuer (alls and investor puts available at 7.250% Notes Due 1996 (g) 153 153 lo-ye r intervals. Pnne pai denonun ted in Swiss francs, but Zero Coulmn Notes Due 1996 (h) 551 600 ES can lumt the utmnatneurement to no in n e than U 53 9.95% Notes Due 1998 125 10.375% Notes Due 2000(i)(j) 186 200 (h) Discounted to yield 12.04%.

10.25% Notes Due 2000 (i) 200 (i) Extendible notes. GEFS will reset interest rates at end ofinitial 5.50% Notes Due 2001 (k) 385 500 and each subsequent interest period. At ca< h rate-reset date, i 1.75% Notes Due 2005 137 200 holders 9ay redeem notes at face value plus accrued intetest.

9.75% Notes Due 2005 (i)(1) 156 200 Extendil ' notes are induded in the current portion of long-term 8.75% Notes Due 2007 (m)(n) 500 500 debt when the interest rate. reset date is within one year.

9.375% Notes Due 2007 (i)(o) 106 300

@ The 10.375% in,itialinterest rate applies until February 20,1990.

8% Notes Due 2011 (i)(p)

"50 250 N ""C"""'Cd."'. peld 15.8E 6.75% Notes Due 2011 (i)((l)

""""'#"'M""'"PP"""'W'"'

50 950 (m) Remarketed reset notes. I he mierest rate wdl be reset at end'of l

8.25% Notes Due 2011 (i)(r) 250 250 initial and subsequent interest perimis (2-5 years) pursuant to an 8.75% Notes Due 2011 (i)(s) 300 300 established formula agreed to by GEFS and the remarketing 7.50% Notes Due 2018 (t) 500 underwriter.

8.25% Notes Due 2018 (m)(u) 500 (n) The 8.75% initialinterest rate applies until December 15,1990.

Fhiating Rate Notes Due 2018 (v) 164 (o) 'nie 9.375% initialinterest rate applies until October 15,1990.

Other notes due 1988 2024 1,440 1,319 (p) The 8% initialinterest rate applies until March 1,1990, less unamortized discount (1,136) (1,466) 0)) The EM jnjtialinterest raie applies until November 1,1991.

(r) The 8.259 nutial mterest rate apphes unul March I,1993.

Total senior 10.538 7,765 (s) The 8.75% initialinterest rate applies until March 4,1993.

Subordinated (t) Reset notes. The 7.50% initialinterest rate applies until March 15,1991.The interest rate will be reset on March 15th in every 8.125% Notes Due 1988-92 15 20 third year thereafter to a rate equal to 108% of the three-year 4.85% Notes Due 1990 25 25 treasury rate.

8.125% Notes Due 1991 25 25 (u) The 8.25% initialinterest rate applies until May 1,1991.

12.25% Notes Due 1992 78 79 (v) The rate ofinterest payable on each note is a variable rate. The 7.85% Notes Due 1993 12 12 interest rate is based on the commercial paper rate each month.

8.25% Notes Due 1997 50 50 Interest ou the notes is payable at the option of GEFS either Other notes due 1988-2001 119 61 annu lly or semiannually.

Total subonlinated 324 272 Totallong-term notes

$10.862 $ 8,037 e long-tenn borrowing inaturities during the next five e In December 1987, GE Capitalinitiated a debt extin-years, including the current portion of notes payable after guishtnent prognun to use the proceeds frotn the issuance one year, are: 1989-$790 million; 1990- $1,320 mil-of new long-term debt to repurchase or redeem approxi-lion (induding $181 million of notes having a rolling 13-mately $1.1 billion of existing debt at market prices or month or 15-month maturity); 1991 ~ $1,226 million; 1992- $1,472 million; and 1993 - $1,610 million.

61

redemption premiums in excess of the net carrying Nots ]7 GE AllOthsrLiabilitiss amounts. This resulted in an after-tax loss of $62 million (net of $39 million tax credit) that was seix>rted as an For GE exc ept GEFS, this account includes noncurrent extraordinary item in the consolidated Statement of Earn-compensation anxl benefit accruals at year-ends 1988 anxi ings for the year 1987.The extinguishment were com-1987 of $1,516 million arul $1,449 million, respectively.

pleted during the first quarter of 1988.

Other noncurrent liabilities include amounts for product

• At 1)ccember 31,1988, GE Capital had established warranties, deferred incentive compensation, deferiul investment tax credit, defened income and a wide variety liix s of ci(xlit aggregating $11,835 inillioin with I82 l>anks, including $9,805 million of revolving cnxlit agreements of other sundry items.

with 124 banks pursuant to which GE C;y> ital has the right to borrow funds for periods exceeding one year. In addi-Note hn M.anorityInterest in Equity of tion, at December 31,1988, approximately $ 1,235 million Consolidated Affiliates of GE's credit lines were available foi use by GE Capital. A total of $3,900 million of these lines also was available for use by GE Financial Services.1)uring 1988, GEFS did not oc< ember 31 On mmm) 1988 1987 borrow uixler ainy of these credit lines.

GE

$228

$190 GEFS compensates banks for credit facilities in the form GEFS 753 112 of fees or a combination of balances and fees as agreed to

-~

$302

$981 with the bank.

l

• At 1)ccember 31,1988, Kidder, Peatnly had estab-The increase of $641 million in minority interest in lished lines of credit aggregating $3,968 million, of which equitv of conv>lidated GEFS affiliates in 1988 was due pri-

$333 million was available on an unsecured basis llorrow-marily to issuance by GE Capital of six thousand shares of ings from banks were primarily unsecured demand obliga-

$ 100 par value variable cumulative preferred stoc k for net tions, at interest rates approximating broker call loan rates, proceeds of approximately $600 million. Dividend rates on to finance inventories of securities and to facilitate the ihis preferred stock during 1988 ranged from 5.'i0% to securities settlement process.

8.38g.

• At 1)cccmber 31,1988, GE Financial Services had interest-rate swap agreements outstanding in the notional principal amount of $799 million under which GE Finan-cial Services agreed to pay interest at fixed rates ranging from 12A0% to 14.38% in exchange for interest at floating rates (1.lilOR) on t he notional amounts. GE Financial Seivices also had inteiest-rate swap agreements in the notional principal amount of $300 million under which GE Financial Servic es agreed to pay interest at floating mtes (l.IllOR) and receive eterest at fixed rates ranging funn 7.81% to 8.329.

1 l

l 62

-m- -

Note Share Owners'Squity In April 1987, GE share owners authorized (a) an increase in the number of authorized shares of common GE preferred st<x k up to 50,000,000 shares ($1.00 par stock from 550,000,000 shares each with a par value of value)is authorized, but no such shares have been issued.

$1.25 to 1,100,000,000 shares each with a par value of Authorized shares of common stock (par value $0.63) total

$0.63; (b) the spht of each previously issued common 1,100,000,000.

share, including shares held in treasury, into two shares of Shares of GE common stock c mm n stock each with a par value of $0.63; arxl(c) an Decernber 31 (In tiniusands) 1988 1987 1986 increase in the number of authorized shares of preferred stock from 2,000,000 shares with a par value of $1.00 per share to 50,000,000 shares with a par value of S.I.00 per ti sury 1

II) (

)

ata haden a@usd Mudange s are.

ia Outstarxling 902.11G 902.953 911.790 lhe effects of translating to U.S. dollars the financial GE share owners' equit y is as follows.

statements of foreign affiliates whose functional currency is the kical cui rency are included in other capital. Cumula-CE share owners' equity tive foreign currency translation adjustments were (In millions) 1988 1987 1986

$ 137 million, $176 million arxl $31 million of additions to Common stock issued other capital at December 31,1988,1987 arxl 1986, llalancejanuary I

$ 584 $ 579 $ 579 respectively.

Adjustnwnt for stock split 5

Balance December 31

$ 584 $ 584 $ 579 Note % OtherStock-Relatedinformation Other capital llalanccJanuary I

$ 878 $ 733 $ 641 Adjustnwnt for st<x k split, (5)

Stock option plans, appreciation rights and perfonnance Io ctu ency translation units are described in the Company's current Pmxy State-9) 5 Unrealimi gains (losses) on ment. Requirements for stock option shares may be met securities hekt by insurance within certain restrictions either from unissued or tirasury J

affiliates 18 (33)

(6) shares. During 1988, options were granted to 1,347 em-l Gai s(k s es)on treasury stmk oyees. As of December 31,1988, a total of 444 individu.

l Other 8

als were eligible to receive class-grant options, and all i

llalance ikxember 31

$ 823 $ 878 $ 733 exempt salaried employees were eligible for special option Retained eamings grants. A total of 2,218 persons held options exercisable at Salancejanuary I

$15,M78 $ 14.172 $12,761 the end of 1988 or in the future, Net earnings 3,386 2,915 2,492 l

Dividends declared (1.314)

(1,209)

(1,081)

Stock option information Average per sharc Balance December 31

$17,950 $15,878 $14,172 Shares subject Option Market (Shares m. thousands) to option price price Common stock held in treasury llalance at January 1,1988 18,613 $33.95 $44.13 Balanc eJanuary 1

$ 860 $ 375 $ 310 Options gnmted 3,232 43.83 43.83 Pun hases 387 846 348 Options exercised (1,578) 22.23 43.48 Dispositions Options surrendemion Employee savings plans (213)

(148)

(109) exercise of appreciation Stm k options and rights (91) 28.01 45.04 appreciation rights (77)

(96)

(71)

Options terminated (240) 41.62 Employee stm k Balance at December 31,1988 19,936 36.41 44.75 ownership plan (11)

(39)

(41)

Dividemi remvestment and share purchase plan (49)

(42)

(33)

Outstanding options and rights expire and the award Contribution to GE period for outstarxling performance units ends on various I ension Trust (25)

(26) dates fromJanuary 1,1989 to December 16,1998. Shares L,onversion oflong-term debt (1)

(24)

(7) available for granting add..itional options at the erxl of 1988 -

Incentive compensation were 11,936,568 (15,148,114 at the end of 1987).

plans (5) 13 4

Balan(c December 31

$ 891 $ 860 $ 375 l

l 1

)

i I

63

1 4

Note h } Commitments and Contingent o Details of" net increase in GEFS financing receiv-Liabilities ables" follow, At Decernher 31,1988, there were no kno,vn contingent On rnillions) 1988 1987 1986 liabilities (including guarantees, pending litigation, taxes increase in loans to and other clanns) that, in the opinion of rnanagernent, custorners

$(23,731) $(I8,990) $(I8,795) would he inaterial in relation to General Electric C<nnpany Principalcollecticas from cunorners 19,802 15.370 15,321 and consolidated affiliates' financial position, nor were there any inaterial conninitinents outside the norrnal I"["'" '\\ i lI " "

" l

,r fi ir (5,031)

(3,117)

(1,632) courseof business, Principalcolkctions on financingleases 3,974 2,291 1,399 Net change in credit card receiv bles (957)

(181)

(72)

Note h SupplementalCashFlows

$ (5,iH3) $ (4,627) $ (3,779)

Information i

e "All other operating activities" in the Staternent of

• GEFS' "all other investing activities" includes the Cash Flows are principally adjustruents to current arxl foll0 Wing-noncurrent accruals of costs arul expenses, arnortization of i

1988 19M 1986 premium and discount on debt, and adjustments to assets such as amortization of go(xlwill anal intangibles.

GEFS be found mlmation about acquisitions and dis [x>sitions can E",'

c,,,';,',

5'

• Infon notes 2 and 3.

. affiliates

$(3,I88)

$(3,769)-

$(3,565)

• Cash used in each of the last three years included the Disimsitions of marketable secunues by insurance y,'g;"" "E' affiliates 2,334 2,624 2,709 Other (1,153)

(137)

(761)

Un millions) 1988 1987 1986

$(2,007)

$(1,282)

$(1.617)

Interest (paid) having maturities inore than 90 days" e

e FS (4 ) (

(3, 1 (1, 6 mcludes the follow, g, m

$(4,670)

$(3,878)

$(2,323)

Incorne taxes (paid) recovered (in anillions) 1988 1987 1986 (federal, foreign, state and local)

Newly issued debt GE

$(1284)

$(1,096)

$(1,546)

Short-tenn (91-365 days) $ 5,916

$ 5,546

$ 4,701 GEFS 251 403 942 lamg-tenn senior 3,936 1,927 1,584

$(1,033)

$ (693)

$_ (604) lemg-tenn subordinated 58 Proceeds-nonrecourse, leveraged lease debt 381 345 (90)

I e Details of" net change in certain broker <lealer

$10,291

$ 7,818

$ 6,195 accounts" are shown below, Repayments and other reductions On millions) 1988 1987 1986 Short-tenn

$ (6,220) $ (5,836) $ (4,283)

I')ng-term senior (2,284)

(526)

(956)

MaiLetable securities of broker <lealer

$(1,009)

$1,826

$(1,472)

I'Ingtenn su ndin ted (6)

(20)

(158)

E"""P'I "Y*""'8-P Securities purchased uixl ragreementsto g[l{)sedebt (261)

(263)

(251)

Securities sold under

$ (8,771) $ (6.645) $ (5,648) agreernents to repun hase 677 117 5,331 Securities sold but not yet pun hasc<l 681 (2,118) 560

$ (573)

$ (103)

$(1,298) 64 L_-_______-______-_______________._______.

Nats % IndustrySegm:ntDet:lla Revenues (In milhons)

Ior the years eruled Decernber 31 Total revenues Intersegnient revenues External revenues 1988 1987 19M6 1988 1987 1986 1988 1987 1986 GE Aerospace

$ 5,343 $ 5,262 $ 4,318

$ 166 $

78 $

73

$ 5,177 $ 5,184 $ 4,245 Aircraf t Engines 6,481 6.773 5,977 119 48 57 6,362 6,725 5,920 llroadcasting 3,638 3,241 1,888 2

3,638 3,241 1,886 hulustrial 7,061 6.662 6,770 706 708 763 6,355 5,954 6,007 hfajor Appliances 5,289 4,721 4,352 5,289 4,721 4,352 hfateriah 3,539 2,751 2,331 40 32 34 3,499 2,719 2,297 lbwer Systerns 4,805 4,995 5,262 126 125 185 4,679 4,870 5,077 Tedmical Pnxtucts arxl Services 4,431 3,670 3,021 161 337 160 4,270 3,333 2,861 Earnings of GEFS 788 552 504 788 552 504 All Other 394 3,176 3,379 4

16 394 3,172 3,363 Corporate items and Eliminations (1,477)

(1,287)

(1,077)

(1,318) (1,332) (1,290)

(159) 45 213 TotalGE 40.292 40,516 36,725 40.292 40,516 36,725 GEFS Financing 5,827 3,507 2,594 5,827 3,507 2,594 Insurance 2,469 2,206 2,017 2,469 2,206 2,017 Securities Broker-Dealer 2,316 2,491 1,176 2,316 2,491 1,176 All Other 43 21 27 43 21 27 TotalGEFS 10,655 8.225 5,814 10,655 8,225 5,814 Eliminations (858)

(583)

(526)

(858)

(583)

(526)

Consolidated revenues

$50.089 $48,158 $42,013

$50,089 $48,158 $42,013 Assets Property, plant and equipment (including equipment leased to others)

(in millions)

At December 31 For the years ended December 31 Depret iation, depletion and Additions amortization 1988 1987 1986 1988 1987 1986(a) 1988 1987 1986 GE Aerospace

$ 3,838 $ 3,943 $ 2,253

$ 208 $ 178 $ 311

$ 170 $ 151 $

i11 Aircralt Engines 5,161 5,066 4,553 234 242 332 251 242 194 Bnalcasting 4,101 3,948 3,464 147 115 388 70 64 31 Industrial 3,729 4,041 4,267 301 274 370 249 315 307 hlajor Appliances 2,284 1,529 1,576 215 II8 104 105 93 97 hlaterials 7,130 3,901 3,587 757 378 600 252 209 "55 Power Systems 2,531 3,266 3,457 127 118 127 138 162 173 Technical Pnxlucts and Servic es 3,183 3,873 2,751 203 235 856 168 170 183 Investment in GEFS 4.819 3,980 2,994 All Other 1,122 2.016 2,193 5

72 417 17 62 56 Corporate items and Eliminations 3.379 2,7')7 3.316 91 48 175 102 83 53 Total GE 41,283 38,300 34,411 2,288 1,778 3,680 1,522 1,544 1,460 GEFS Financing 44,874 34,163 25,867 1,738 503 701 695 325 337 Insurance 7,849 6,481 5,517 26 3

4 6

4 4

Securities itroker-Dealer 21,891 20,041 22,181 19 60 40 32 28 13 All Other 331 721 258 14 13 19 11 12 11 Totad GEFS 74,945 61,406 53,823 1,797 579 764 744 369 365 Eliminations (5,363)

(4,292)

(3,416)

Consolidated totals

$110.865 $95,414 $84,818

$ 4,085 $ 2,357 $ 4,444

$ 2,266 $ 1,913 $ 1,825 1

(a) Includes $ 1,638 milhon acquired with RCA.

65

O llevenues indude income from all sources: i.e., fi>r o Broadcasting consists primarily of the National l

GE, Ix>timdes of pnxlucts arxl servi ( es to t ustomers arxl llroadcasting Company (NilC), which is the current leader

)

"other income"; for GEFS, " car red income" as described in in network television. NilC's principal businesses are the tw>te 1. In general,it is GE x>1 icy to price sales from one furnishing within the United States of netwur k television I

Company com;xinent to arx>ther as nearly as practical to services to affiliated television stations, ihe pnxtuction of equivalent ( ominercial selling pric es. Sonx w liat inor e thari live arxl iccoitled television programs aix! the operation, one-fifth of GE's external sales are to agencies of the U.S.

urxler li(enses from the Federal Commtmications Com-government, GE's largest single customer. N1ost ofihese mission (FCC), of seven VIIF television broadcasting i

sales were aciuspace atul aircraft engine pnxtucts arul stations. The NilC Television Network is one of three services.

competing major national commercial broadcast television

• Operating prolit by inulustry segment is on page 33 netwur ks arxl serves more than 200 regularly affiliated sta-tions within the United States. The television stations NilC of this re1x>rt.

• Effective with 1988, GE teased re1xnting resuhs fi>r

"*"* **I "P'"S ".'# N*7",ted in Chicago, Clevelarul, Deii-ver, los Angeles, hhanu. New iork atul Washington, DL.

the fbrmer Consumer Pnx.lucts segment inasima h as the liroadcasting operations are subject to FCC.regulau.on arxl I

largest contributor to scienues in that segruent was the station licensing. NilC also had owned aixl operated e,ght i

consmner electronxs business, w hich was transferred to s

nulio Inuadcasting stations. Ilowever, seven of. he nuh.

t o

Thomson, S. A. at the eixl of 1987. Consumer electronics stations were sokiin various transa(tions during 1988 with iesults Ibr prior years are now dassified as All Other. The sale of the last orm expected m 1989. NilC is currendy iemaining businesses in the fbrmer Consumer Pnxtucts (wparxHng its operations, including investment atul pro-segment are m>w included in other segments: 1 ighting in gmmnung activities in cable telermon.

the trulustrial segment; Denver arul hiiami television sta-tions in the llroadcasting segment; and licensing activities e Industrialencompasses factory automation pnxlucts, in All Other. Prior data lbr these segments have been motors, electrical equipment Ibr iixlustrial arxl commercial adjusted ihr(omparabilitv. A description of ca(h of the construction. GE Supply Company, transportation systems Company's irulustry segments ibliows.

ami lighting pnxlucts. Customers fbr many of these pnxl-ucts and senices inchxic electrical distributors, original GE equijnnent manufacturers and industrial end users. Fac-tory automanon pnxlucts cover a broad range of electrical e Aerospace pnxlucts azul se:Tices encompass electron-and electromc pnxlucts..irichidiiig drive systerns, with ics, avionic systems, military vehic le equipment, automated emphasis on manufacturing and advanced engineering test systems, computer softwaie, armament systems, mis-automation applications. hlotors arxl tuotor-telated pnKI-sde system components, simulation systems, spacecraf.t, ucts consist mainly of. appliance motors and contn>ls but communication systems, radar, sonar and systems integra-nyer sizes of. motors fbr a broad range of a o nu u tion. Afost acrospac e s; des are to agencies of the United mdustrial users. hiotor pnxtucts are used withm GE and States government, principally. the Department of Def.ense

• I'"'""y. Electncal d.istnbution and control and the National Aeronautics and Space Administration.

equipment is sold Ior.mstallation in commercial, mdustnal a Aircraft Engines and replacement parts are manufac-and residemial facilities. GE Supph operates a natianwide tured and sold by GE lbr use in military and conunercial ndwork of electrical supply houses. Trans;mrtation sys-aircraft, fbr use in naval ships and for use as industrial tems include diesel-electric and electric kiconotives, transit

[xmer sources. GE's military engines are used in a wide propulsion equipment, motorized wheels Ib Jf-highway variety of aircraft that includes Iighters,lxnnbers, trans' vehicles, such as those used in mining operatious, and ports arul helicopters. CF6 engines are used in the drilling devices. Iexumotives are sold principally to htcDomxIl Douglas DC-10, the Airbus hulustric A300 domestic and ihreign railroads, while man Lets f or other and the ik>eing 7-17. 51 ore advanced CF6 engine nuxlels pnxlucts include state and urban transit authorities arxl have been selected to 1mer ihe ikicing 717 and 767, the industrial users. Lighting pnxlucts include a wide variety Airbus hxlustric A310, A300-600 and A330,and the of Imnps -incandescent, Fluorescent, high intensitv dis-NicDonnell Douglas hlD-11. Of growing importance is chage3alogen and yciahy -~ amell as wiring devices the CFh156 engine finnily pnxtucedjointly by GE and and quartz pn> ducts him Lds and customers are princi-SNECh1 A of Enmre and maiLeted through their CFht paHy in the United States, ahhough ihreign markets also are Ine rnationaljo, t venture. Apphcations mdude the sen ed. These mar Lets are extremely varied, ranging from m

Ikicing 737-300,737-400 arxl 737-500, and the re-engined thicing KC-135 military tanker. Advanced CFh156 engine nuxlcis are used for the Airbus hxtustrie A320 and will be offered on the long-range Airbus Industrie A310. GE also pnxlucesjet engines for executive aircraft arxl regional conunuter airlines.

im

.____________________-_______w

v household consumers to conunercial and industrial end logs continue to be low by long-term historical starxiards users arni original equipment manufacturers. Through despite some improvement during 1988. GE iaanagement inost of 1988 the Irulustrial segment also included semi-continues vigorous efforts to improve cost-competitiveness corxiuctor operations, rnost of which were soki in the aixt to adapt pnxlucts arxl marketing to die changing envi-fourth quarter.

ronment. Steam turbine-generators are sold to the electric e Major Appliances irxludes kitchen and laundry equip-utility industry, to the U.S. Navy arxt, for cogeneration, to ment such as refrigerators, ranges, microwave ovens, private industrial customers. Marine steam turbi arxl freezers, dishwashers, clothes washers and dryers, and propulsion gears also are sold to the U.S. Navy. (

tur-j room air emulitioners. These are sold under GE, Hot [ mint bines are used principally as packaged power pl nts for

]

and Monogram bnuxis and, increasingly, under private electric utilities and for industrial cogeneration and j

bnmds fi>r retailers. Distribution of appliances using the mechanical drive applications. Centrifugal compressors

]

RCA bnmd is planned in 1989. GE microwave ovens aixj are sold for application in gas reinjection, pipeline senices f

room air corxlitioners are mainiv sourced from foreign and such process applications as refmeries and ammonia l

suppliers while investment in Company-owned domestic plants. Although there have been no nudear plant orders facilities is focused on refrigerators, dishwashers, mnges in the United States since the mid-1970s arxl international and home laundry equipment. Acquisition of Roper Cor.

activity has been very low, GE continues to invest in

)

poration in April 1988 added to GE's pnxluctive capacity advanced technology development arxl to fi>cus its j

and broadened its pnxluct offerings, including gas ranges.

resources on refueling and sening its installed tx>iling-A large [mrtion of major appliance sales is to a variety of water reactors. Power delivery pnxlucts include trans-i tetail outlets with a significant Imrtion of sales of cenain fi>rmers, relays, electric load management systems, power pnxlucts such as laurxtry equipment arxl refrigemtors conversion systems and meters, principally fi>r electric util-being fi>r replacement of older pnxtucts. The other princi.

ities. Installation, engineering and repair services include pai market consists of residential building contractors who

. management and technical expertise fi>r large pmjects, l

install major appliances in new dwellings. A nationwide such as power plants; maintenance, inspection, repair arxl service network sup[xnts GE's appliance business.

rebuilding of electrical apparatus pnxiuced by GE arxl e Materialsincludes high-performance engineered plas-others; on-site engineering arxl upgrading of already tics used in applications such as substitutes fi>r metal and instaHed pmdmts s<)ld by GE and others; and environmen-glass in automobiles and as housings fi>r computers arxl tal systems for uu,h,u,es. An affiliate pmviding international other business equipment; silicones; superabrasives such as constmetion sentes was sold at die beginning of 1988.

man-made diamonds; and laminates. hlarket opportuni.

o Technical Products and Services consists of technology des for many of these pnxlucts are created by functional operations providing pmducts, systems and senices to a replaccinent that provides customers with an improved variety of customers. Ilusinesses in this segment include I

material at lower cost. These materiale are sold to a divene medical systems arxl senices, communications and infor-I customer base (mainly manufacturers)in the United States mation senices, anxi cenain odier specialized services.

and abroad. Acquisition of the chemicals businesses of hiedical systems include magnetic resonance (NIR) scan-llorg-Warner Corporation at the end of 1988's third ners, computed tomography (CT) scanners, x-ray, nuclear quarter provides GE with a new pnxluct - Alls resins, a imaging, ultrasound, arxl other diagnostic equipment arxl finnily of thennoplastic resins used by custom molders and sup;xnting senices sold to domestic anxl fi> reign hospitals major original equipment manufiteturers for use in a var.

and medical fiicilities. GE Americom, the leading domestic ety of applications, including fabrication of automotive satellite carrier, operates seven domestic satellites provid-parts, computer enclosures, major appliance parts arxl ing distribution senices for cable television, bmadcast tele-pipe. The acquisition also adds technical and manufactur_

sision and mdio, and voice, video and widebarxl data ing strength and domestic anxl of fshore marketing facilities senices to agencies of the fedeml government. Common i

and expenise that complement GE's existing businesses.

carrier services of Americom are subject to regulation by l

Af atcrials also includes ladd Pet roleum Corporation, an the FCC. GE's mobile communications puxlucts consist oil and natural gas developer and supplier with operations mainly of mobile and hand-held two-way radios, cellular mainly in the United States.

telephones arxl larxi-mobile cellular systems for a variety e Power Systems serves worldwide utility, irxlustrial and of business and government customers. Information serv-governmental customers with pnxlucts fi>r the genemtion, ices re pr vided both to mternal and external customers transmission and distribution of electricity and with related by GE 1nfinmation Sen ices, GE Consulting Senices and installation, engineering and repair senices. Although GE l

remains a leader in most power systems pnxiucts, domes-tic anxi foreign mar Lets have been de lining for a number of years. Worldwide competition continued to intensify in 1988 with potentially im[ortant new combinations by for-eign anxl domestic competitors. New order rates and back-67

t he G E Computer Seni< c operation. These include third-party investors; and commercial and residential real enharx ed computer-based communications sen ices, sut h estate financing. Acquisition of Montgomery Ward & Co/s l

as data network senic es, electronic messaging and elec-credit operations inJune 1988 added to GECC's earning tronic data interchange, which are offered to c onunercial assets, particularly in credit card operations. GE Capital arxlirulustrial customers hrough a worktwide networL; also is an equity investor in certain other senice arxl finan-application software pac kages; custom system design arxl cial senices organizations arxl participates in leveraged programming senices; arul irxleperxlent maintenance aml buyouts. Although leasing has been a major factor in rental / leasing services for minicomputers and microcom-GECC's growth in recent years, GECC has actively changed puters, ele ( tronic test inst rmnents ami data communica-its investment portfi>lio to place greater emphasis on asset tions equipment. A separate senices com[xinent provides ownership, management arxl operation. Virtually all prod-(

a var icty of specialized services to government customers.

urts financed by GECC are manufactured by companies RCA Glolxum arul assets of The Calma Company were other than GE.

sold during 1988.

• Insurance consists mainly of ERC, a multiple-line l

• Eamings of and Investment in GEFS are shown on a property and casualty reinsurer that writes all lines of rein-

"one-line" basis in GE's segment data tiut are eliminated in surance other than title arxl annuities. ERC reinsures l

consolidation. A separate discussion of GEFS segments property and casualty risks written by more than 1,000 l

appean. below.

domestic and foreign insurers and augments its foreign i

e All Other fic periods prior to 1988 consists mostly of business through subsidiaries located in the United King-fiinner mnsumer electronics operations (principally video dom and, sinceJanuary 1988,in Denmark. By way of and audio pnxlucts, including operations acquired from other subsidiaries, ERC writes property arxl casuahy rein-RCA in 1986). Other historical data reflect miscellaneous surance through brokers and provides reinsurance broker-l fi>nner RCA activities no longer owned by GE mal,in 1985 age sen ices. ERC also writes certain specialty lines of i

arul 1981, the remainder of mining activities of GE's fbr.

insurance on a direct basis, principally excess workers' mer af filiate, Utah International Inc. Ongoing operations compensation Ihr self-insurers, libel and allied torts, atxt inchule a small affiliate that is an equity investor in selected errors arxf omissions coverage fbr insurance agents and brokers. It is licensed in all states of the United States, the real estate development projects and a few residual invest.

ments of a venture capital wrporation. most of whose District of Columbia, certain provinces of Cimada and in

]x>rtfolio was sold in 1987.

otherjurisdictions. ERC's business is generally subject to regulation by various insurance regulatory agencies.

Irsser insurance activities of GEFS include certain GECC GEFS ates that provide private mortgage insurance, life a

The business of General Elect ric Fin:mcial Sen ices, Inc.

reinsurance and, fbr G ECC customers, credit life and cer-l (GEFS) consists of the ownership of three affiliates that, tain types of nupenykasuahy insurance.

I together with their affiliates and other investments, consti-Iute General Electric Companfs principal financial serv.

• Securities Broker-Dealer represents Kidder, Pealxxly, i(es activities. GEFS owns all of the conunon stock of which is a major investment banking and securities firm.

Geacral Electric Capital Corporation (GECC) and of Principal businesses include securities underwriting; sales i

Employers Reinsurance Corporation (ERC) and owns 80g and trading of equity and fixed income securities; financial of Kidder, Pealxxty Group 1nc. (the other 20% is held by futures activities; advisory senices (br mergers, acquisi-l or on behalf of certain Kidder, Pealxxty officers).

tions anxi other cor}xnate finance matters; merchant bank-l lbr industry segment purix>ses, Financing consists solelv ing; research sen ices; arxl asset management. These senices are provided in the United States and abroad to of activities of GECC; Insurance consists principally of activities of ERC but also includes certain insurance enti, domestic and foreign business entities. governments, gov-ties owned by GECC; Securities Broker-Dealer consists ernment agencies, and individual and institutionalinves-entirely of Kidder, Pealxxty's operations; and All Other is tors. Kidder is a member of the principal domestic mainly GEFS' corixnate activities not idemifiable with spe.

securities and commodities exchanges and is a primary rific industry segments.

dealer in United States government securities. Certain Additional inlbrmation about eat h GEFS segment afTiliates of Kidder, Pealxxly are subject to the rules and

follows, regulations of various federal, state and industry regula-

• Financing activities of GECC include time s; des, jory agencies that apply to securities broker-dealers, induding the U.S. Securities and Exchange Commission, revolving credit and inventory financing for retail mer-U.S. Commodity Futures Trading Commission, New Yor k

{

chants (major appliances, tek vision sets, furniture arul Stock Exchange, National Assmiation of Securities Dealers other home furnishings, and personal computers); auto.

and the Chicago Board of Trade.

mobile leasing and automobile inventory financing; home and recreation financing (principally time sales and dealer inventory financing of mobile homes); commercial and iixlustrial loans and equipment sales financing provided through leases, time sales and loans; leasing senices for r,8

Nota M. GsogrrphicSagmentinfcrmitien(cenaclid:ted)

Revenues (in niillions)

For the years ended Ib enber 31

'Iotal r evenues Intersegruent revenues External resenues 1988 1987 1986 1988 1987 1986 1988 1987 1986 United States

$ 16,361

$ 15,160 $38,828

$ 874 $ 801 5 639

$45,490 $44,359 $38,189 Otherareas of the world 5,576 4,894 4.387 977 1,095 563 4,599 3,799 3,824 Intercompany eliminations (1,851)

(1,896)

(1,202)

(1,851) (1,896) (1,202)

Total

$50,089 $48,158 $ 12.013

$50,089 $48,158 $42.013 Operating profit Assets For the years ended Deceniber 31 At 1)ecernber 31 1988 1947 1986 1988 1987 1986 United St;ues

$ 4,941

$ 3,715 $ 2,989

$102,327 $89,480 $80.831 Other areas of the world 1,009 725 740 8,641 6,027 4,090 Intercornpany eliminations (10) 10 7

(103)

(93)

(103)

Total

$ 5,940 $ 4,450

$ 3,736

$110,865 $95.414 $84,818 U.S. revenues include GE exports to extemal customers, foreign o;rration liabilities, rninority interest in equity and and royalty atullicensing incoine frorn foreign sources.

GE interest in cquity were $6,188 million, $ 142 million GEFS' 1986 and 1987 operations were virtually all in the and $2,311 million, respectively, The amounts were United States and, although GEFS' offshore activity

$3,196 million, $111 million and $2,720 million, respec-began to increase in 1988, non-U.S. operations were not tively, at 1)ecember 31,1987; and they were $1,87I mil-significant.

lion, $112 million and $2,107 million, respectively, at Revenues, operating profit and assets as x>ciated with December 31,1986.

foreign operations are shown alx>ve. At year-end 1988, U.S, exports to external customerr, (in rnillions) 1988 1987 1986 Europe

$1,805 $1,253 $1,634 Pacific Basin 1,357 1,146 985 Middle East and Africa 937 762 490 Americas 531 625 476 Other areas 240 238 124 Total

$4,870 $4,024 $3.709 69

• s

• 3 5 ~~~~+-**

p fl First quarter Sc(ond quarter Third quarter Fourth quarter g

IIal (Dollar amountsin millions; per share 1988 1987 19M7 1988 1987 1987 1988 1987 1987 1988 1987-1987 E'

amounts m dollars) original restated original testated original ' restated pro forma re;xirted f

Consolidated h

operations (T

Net earnings

$ 725 $ 624 $1,177 $ 835 $ 720 $ 679 $ 815 $ 703 $ 661

$1,011 $ 868 $ 398 l'er share 0.80 0.68 1.29 0.93 0.79 0.74 0.90 0.77 0.73 1.12

. 0.96. 0.44 al Dividends declared ltrshare 0.35 0.315 0.35 0.33 0.35 0.33 0.41 0.35 h

b Earnings before extraordinary item jj arxlcumulauve p

effect of account-ing changes 725 343 319 835 720 679 815 703 661 1,011 353 460-lYrshan-0.80 0.37 0.35 0.93 0.79 0.74 0.90 0.77 0.73 1.12 0.40 0.51 f.

Gommon stm L mar-

. I:

Let price

-high 47 %

55%

44 %

56% -

44 %

66%-

46 %

62%,

M

-low 40 43 %

38 %

-49%

39 53 %

42 %

38 %

g Selected data h

GE Sales of prmlucts ll and services 7,975 8,315 9,245 9,560 9,306 9,404 12,298 12,036

')

f' Gn>ss profit from 3,229 sales 1,978 2,048 2,365 2,359 2,349 2,022 3,270 Unusual expenses

/

(before tax)

(308)

(58)

(54)

(607)

?v GEFS p

Earned income 2,411 2,048 2,465 1,976 2,717 1,970 3,062 2,231 i

Operating profit 246 214 223 168 230 147 328 43 Unusualexpenses 1

(before tax)

(54)

(37)'

j Extraordinary item

{l (after tax)

(62) y For GE, gmss profit from sales is sales of goods anxi accounting changes by: first quaner- $24 million (2 cents scivices less cost of gomis and services sold, and it is before per share); secorxl quarter-$41 million (5 cents per unusual expenses. For GEFS, operating profit is as pre-share); third quarter- $42 million (4 cents per share):

sented on page 33 of this re[xut, and it includes unusual and fourth quarter- $31 million (4 cents per share). In h

expenses.

order to provide adequate data for comparing 1988 atxl

[

Second, third-and fourth-quarter 1988 net earnings 1987 results by quarter, amounts in the table above for the

[p included negative elTects ($23 million - 2 cents per share, first three quarters of 1987 are shown before and after the

(

$43 million-5 cents per share and $231 million-26 restatements, arxl for the fourth quarter are shown " pro cents per share, respectively) of expenses and accruals for fonna" as they would have been if the entire effect of the abnonnally high warnmty costs for certain refrigerator accounting change had been recorded in that quarter y

compresson when the decision to adopt was made.

M In the fourth quarter of 1987, the Company elected to Separately, fint-quarter 1987 net earnings included the adopt thenjust-issued Statement of Financial Accounting cumulative positive effect ($281 million,31 cents per f.

Standards No. 96 pertaining to accounting for income share) toJanuary 1,1987 of changing inventory account-taxes.The cumultive effed toJanuary 1,1987 on net ing; and fourth-quarter 1987 net earnings included an earnings was $59 million (6 cents per share) for GE and extraordinary loss ($62 million,7 cents per share) on early (g

$518 million (57 cents per share) for GEFS. In accordance extinguishment of debt by GECC.

with SFAS No. 96 transition rules, it was necessary to After taxes, unusual items (mainly business restructur-restate first-quarter 1987 for this cumulative efTect even ing expenses)in 1987 plus the extraordinary item were y

though the decision to adopt could not be made until year-somewhat more than the total positive impact on net earn-

'O end 1987. Also, as required, earnings for each of the ings for the year fnun accounting changes.

interim quarters of 1987 had to be restated as if adoption had occunul at January 1,1987. The elTect of these restatements was to reduce total net earnings and earn-ings before extraonlinary item and cumulative effect of L

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t Ccrporate Headquarters Form 10-K and Other Reports General Electric Company The financialinfonnation in this report,in the opinion of 3135 Easton Turnpike management, substantially conforms with or exceeds the litirfield, Conn. 06431 infonnation required in the "10-K Report" to be submitted Annual Meeting to the Securities atxl Exchange Commission at the end of The 1989 Annual Meeting of the General Electric March. Certain supplemental information is m that report, Company will be held on Wednesday, April 26, at the hgwever, and copies without exhibits will be available, 1Iyatt Regency Greenville m. Greenville,S.C,. without charge, from: Corporate Investor Communica-tions, General Electric Company, Fairfield, Conn. 06431. Dividend Reinvestment Plan Copies of the General Electric Pension Plan, the Sum-Share owners who have one or rnore shares of GE stock mary Annual Report for GE emplope benefit plans sub-registered in their names are eligible to invest cash up to ject to the Employee Retirement income Security Act of - $10,000 per rnonth and/or icinvest their dividends in the 1974, and other GE employee benefit plan documents arxl GE Dividend Reinvestment awl Share Purchase Plan. infonnation are available by writing to Corporate Investor For an authorization form and prospectus, write to: Communications and specifying the information desired. GE Share Owner Services, P.O. Box 206, Schenectady, GE Financial Senices has a separate Annual Report, N.Y.12301-0206. and lx>th it and GE Capital Corporation file Fonn 10-K Principal Transfer Agent and biogistrar [x>rts with the Securities and Exctiange Commission. The Bank of New York Copies of these reports may be obtained from: General Atin: Receive & Deliver Department Electric Fmana,al Senices, Inc., P.O. Box 8300, Stamford, Church Street Station Conn. M. P.O. Box 11002 The Annual Reports of the General Electnc Foundations New York, N.Y. 10249-1002 also are available on request. Stock Exchange Information uct Infonnation .For mii>nnation about GE consumer products and serv-in the United States, GE common stock is listed on the ices, c 11 The GE Answer Center

• at (800) 626-2000. For New York Stock Exchange (its principal market) and on the Boston Stock Exchange. GE common stock also is inf nn tion about GE technical, commercial arid indus-listed on certain foreign exchanges, including The Stock tri i pnxlucts and services, call the GE Business Informa-Exchange, london and the Tokyo Stock Exchange.

u n Center at (518) 438-6500. For infonnation about the As of December 8,1988, there were about 532,000 v ried financial products and services ofTered by GE Capi-share owners of record. t ICor[x> ration, call (800)243-2222. 019X9 General Electric Company Printed in U.S.A. Note: Unless otherwise indicated by the context, the terms "GE." " General Ek ctric" and " Company" are used on the basis of con-solidation described on page +1. sisin At $ etIcialc, $, GE and RCA are r egistered trademaris of General Electric Company: A and NilC are rexisterni trademarks of National linud-casting Company. Irn.: @ arxl " irxlicate egistered arxl tinreg-istered trade and service marks. 71

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f V ~ l( JT'A--])37 Usr~ Uw GE Nuclear Energy Geners Decite bmpay l, V,. g huneatas Nuclear Cemer '^") B.a 460, Vanecnos Road a p Cy win CA M5EE DOCKETED S USNRC MAR 2 01989 ) 4 March 15, 1989 I" NM$$ gAtt SECTION // DOCKET CLERK ' c3 .N g h 6 r' I4 l Mr. R. E. Cunningham, Director p j' . Division of Industrial & Medical Nuclear Safety -MARPM3bb Office of Nuclear Material Safety & Safeguards U.S. Nuclear Regulatory Commission [ g g,yuCLEAR REG TOW p Washington, D.C. 20555 COM$l0 C g q MailSection }

Reference:

Docket 70-754 g %I p

Dear Mr. Cunningham:

-[ As is customary, copies of the General Electric Annual Report are forwarded l to the Commission in order to provide updated General Electric' corporate and financial information. Accordingly, copies of the 1988 Annual Report are. I enclosed for the referenced docket. .>I k. y, s Sincerely, G. E. Cunningham Senior Licensing Engineer (415) 862-4330 /ca Enclosures t, 6@f m L d / 25328 i i' I t . k-. ___m.__

s 'a k 1 uoco nu. 76-754 CONTROL NO. E632f> 1 DATE OF D0C. MarrJ, 15 1981 DATE RC\\'O Ylhrch 20. 1989 _ A FCL'F PDR / FCAF LPDR I & E REF. SAFEGUARDS FCTC / i-OTHER / Mbf DATE INITIAL //- 4 e 8 L __}}