GENERAL ELECTRIC CAPITAL CORP - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____

Commission file number 1-6461 GENERAL ELECTRIC CAPITAL CORPORATION (Exact name of registrant as specified in its charter)

Delaware		13-150070

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

260 Long Ridge Road, Stamford, CT		06927

(Address of principal executive offices)		(Zip Code)

(Registrant's telephone number, including area code) (203) 357-4000 _______________________________________________ (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

At May 3, 2004, 3,985,403 shares of voting common stock, which constitutes all of the outstanding common equity, with a par value of $4.00 per share were outstanding.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

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Table of Contents

General Electric Capital Corporation

Part I - Financial Information		Page

Item 1. Financial Statements
Condensed Statement of Current and Retained Earnings		3
Condensed Statement of Financial Position		4
Condensed Statement of Cash Flows		5
Notes to Condensed, Consolidated Financial Statements (Unaudited)		6
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition		13
Item 4. Controls and Procedures		21

Part II - Other Information

Item 6. Exhibits and Reports on Form 8-K		21
Signatures		22

Forward-Looking Statements

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will" or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance. Forward-looking statements are based on management's current expectations and assumptions, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these expectations and assumptions due to changes in global political, economic, business, competitive, market, regulatory and other factors. We undertake no obligation to publicly update or review any forward-looking information, whether as a result of new information, future developments or otherwise.

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Part I. Financial Information

Item 1. Financial Statements

Condensed Statement of Current and Retained Earnings
General Electric Capital Corporation and consolidated affiliates

	First quarter ended March 31 (unaudited)

(In millions)	2004			2003

Revenues from services (note 6)	$	13,302		$	11,674
Consolidated, liquidating securitization entities (note 4)		327			-
Sales of goods		576			487

Total revenues		14,205			12,161

Interest		2,427			2,368
Operating and administrative		4,715			3,411
Cost of goods sold		551			437
Insurance losses and policyholder and annuity benefits		1,843			2,165
Provision for losses on financing receivables		953			742
Depreciation and amortization of equipment on operating leases (including buildings and equipment)		1,418			1,091
Minority interest in net earnings of consolidated affiliates		24			31
Consolidated, liquidating securitization entities (note 4)		202			-

Total costs and expenses		12,133			10,245

Earnings before income taxes		2,072			1,916
Provision for income taxes		(419	)		(298	)

Net earnings		1,653			1,618
Dividends		(390	)		(181	)
Retained earnings at beginning of period		29,445			27,024

Retained earnings at end of period	$	30,708		$	28,461

See "Notes to Condensed, Consolidated Financial Statements."

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Condensed Statement of Financial Position
General Electric Capital Corporation and consolidated affiliates

(In millions)		March 31, 2004				December 31, 2003

		(Unaudited)
Cash and equivalents			$	6,570			$	9,719
Investment securities				95,090				92,480
Financing receivables:
Time sales and loans, net of deferred income				175,678				169,683
Investment in financing leases, net of deferred income				60,762				59,933

				236,440				229,616
Allowance for losses on financing receivables				(6,326	)			(6,198	)

Financing receivables - net				230,114				223,418
Insurance receivables				11,540				11,952
Other receivables - net				16,599				16,351
Inventories				213				197
Equipment on operating leases (at cost) including buildings and equipment, less accumulated amortization of $19,624 and $16,587				43,257				38,615
Intangible assets (note 5)				24,681				22,610
Consolidated, liquidating securitization entities (note 4)				23,699				26,468
Other assets				64,936				64,618

Total assets			$	516,699			$	506,428

Short-term borrowings			$	134,575			$	126,105
Long-term borrowings
Senior				158,739				159,616
Subordinated				963				963

Total borrowings				294,277				286,684
Accounts payable				13,785				14,124
Insurance liabilities, reserves and annuity benefits				101,559				100,449
Consolidated, liquidating securitization entities (note 4)				22,855				25,721
Other liabilities				19,998				20,700
Deferred income taxes				12,415				10,411

Total liabilities				464,889				458,089

Minority interest in equity of consolidated affiliates				2,584				2,098

Capital stock				19				19
Additional paid-in capital				14,602				14,236
Retained earnings				30,708				29,445
Accumulated gains (losses) - net ^(a)
Investment securities				2,973				1,538
Currency translation adjustments				2,541				2,621
Derivatives qualifying as hedges				(1,617	)			(1,618	)

Total shareowner's equity				49,226				46,241

Total liabilities and equity			$	516,699			$	506,428


(a)	The sum of accumulated gains (losses) on investment securities, currency translation adjustments and derivatives qualifying as hedges constitutes "Accumulated nonowner changes other than earnings," and was $3,897 million and $2,541 million at March 31, 2004 and December 31, 2003, respectively

See "Notes to Condensed, Consolidated Financial Statements."

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Condensed Statement of Cash Flows

General Electric Capital Corporation and consolidated affiliates

	First quarter ended March 31 (Unaudited)

(In millions)	2004				2003

Cash Flows - Operating Activities
Net earnings	$	1,653			$	1,618
Adjustments to reconcile net earnings to cash provided from operating activities
Provision for losses on financing receivables		953				742
Depreciation and amortization of equipment on operating leases (including buildings and equipment)		1,418				1,091
Increase (decrease) in accounts payable		(877		)		370
Increase (decrease) in insurance liabilities, reserves and annuity benefits		1,026				(210	)
Consolidated, liquidating securitization entities		196				-
All other operating activities		553				(1,394	)

Cash from operating activities			4,922			2,217

Cash Flows - Investing Activities
Increase in loans to customers			(62,298	)		(53,128	)
Principal collections from customers - loans			61,805			50,129
Investment in equipment for financing leases			(4,100	)		(3,982	)
Principal collections from customers - financing leases			4,610			5,005
Net change in credit card receivables			1,035			1,115
Equipment on operating leases (including buildings and equipment):
- additions			(1,928	)		(1,476	)
- dispositions			768			1,472
Payments for principal businesses purchased, net of cash acquired			(12,147	)		-
Purchases of securities by insurance and annuity businesses			(3,952	)		(9,068	)
Dispositions of securities by insurance and annuity businesses			3,113			8,381
Consolidated, liquidating securitization entities (note 4)			2,559			-
All other investing activities			1,822			(1,783	)

Cash used for investing activities			(8,713	)		(3,335	)

Cash Flows - Financing Activities
Net increase (decrease) in borrowings (maturities 90 days or less)			3,898			(3,276	)
Newly issued debt - short-term (91-365 days)			310			393
Newly issued debt - long-term senior			9,988			16,041
Proceeds - non-recourse, leveraged lease debt			220			49
Repayments and other reductions - short-term (91-365 days)			(8,740	)		(10,857	)
Repayments and other reductions - long-term senior debt			(599	)		(253	)
Principal payments - non-recourse, leveraged lease debt			(264	)		(414	)
Proceeds from sales of investment contracts			2,657			2,390
Redemption of investment contracts			(3,683	)		(1,885	)
Dividends paid			(390	)		(181	)
Consolidated, liquidating securitization entities (note 4)			(2,755	)		-

Cash from financing activities			642			2,007

Increase (decrease) in cash and equivalents			(3,149	)		889

Cash and equivalents at beginning of year			9,719			6,983

Cash and equivalents at March 31	$		6,570		$	7,872


See "Notes to Condensed, Consolidated Financial Statements."

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Notes to Condensed, Consolidated Financial Statements (Unaudited)

1. The accompanying condensed, consolidated quarterly financial statements represent the consolidation of General Electric Capital Corporation and all of our affiliates (GECC) - companies that we directly or indirectly control (consolidated affiliates). As described in our Annual Report on Form 10-K for the year ended December 31, 2003, we reorganized our businesses on January 1, 2004. As a result of reorganizing our businesses around markets and customers, we reduced our number of reporting segments from 5 to 4. On March 30, 2004, we provided the required reclassified information about this reorganization, as it relates to prior periods, in a Form 8-K. We reclassified certain prior year amounts to conform to the current period presentation.

2. The condensed, consolidated quarterly financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of the results of operations, financial position and cash flows. The results reported in these condensed, consolidated quarterly financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. We label our quarterly information using a calendar convention, that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish actual interim closing dates using a "fiscal" calendar, which requires our businesses to close their books on a Saturday in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our Web site, www.ge.com/en/company/investor/secreports.htm.

3. We adopted Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46R, Consolidation of Variable Interest Entities (Revised), on January 1, 2004, adding $1.5 billion of assets and $1.1 billion of liabilities to our consolidated balance sheet as of that date. The most significant entity consolidated was Penske Truck Leasing Co., L.P., which was previously accounted for using the equity method. This accounting change did not require an adjustment to earnings and will not affect future earnings or cash flow.

We adopted FIN 46, Consolidation of Variable Interest Entities on July 1, 2003, and consolidated certain entities in our financial statements for the first time. Our consolidation of the entities resulted in a $339 million after-tax accounting charge to our third quarter net earnings. This charge resulted from several factors. For entities consolidated based on carrying amounts, the effect of changes in interest rates resulted in transition losses on interest rate swaps that did not qualify for hedge accounting before transition. Losses also arose from the FIN 46 requirement to record carrying amounts of assets in certain securitization entities as if those entities had always been consolidated, requiring us to eliminate certain previously recognized gains. For certain other entities that we were required to consolidate at their July 1, 2003, fair values, we recognized a loss on consolidation because their liabilities, including the fair value of interest rate swaps, exceeded independently appraised fair values of the related assets.

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4. We securitize financial assets in the ordinary course of business to improve shareowner returns. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improving returns, these securitization transactions serve as funding sources for a variety of diversified lending and securities transactions. Historically, we have used both supported and third-party entities to execute securitization transactions funded in the commercial paper and term bond markets.

The following table represents assets in securitization entities both consolidated and off-balance sheet.

	At

(In millions)	3/31/04		12/31/03

Receivables secured by:
Equipment	$	14,242	$	15,616
Commercial real estate		14,070		15,046
Other assets		9,383		9,119
Credit card receivables		8,873		8,581

Total securitized assets	$	46,568	$	48,362

On-balance sheet assets in securitization entities	$	23,699	$	26,468
Off-balance sheet
Supported entities		4,217		4,092
Other		18,652		17,802

Total securitized assets	$	46,568	$	48,362

Securitized assets that are on-balance sheet were consolidated on July 1, 2003, upon adoption of FIN 46, Consolidation of Variable Interest Entities. Although we do not control these entities, consolidation was required because we provided a majority of the credit and liquidity support for their activities. A majority of these entities were established to issue asset-backed securities, using assets that were sold by us and by third parties. These entities differ from others included in our consolidated statements because the assets they hold are legally isolated and are unavailable to us under any circumstances. Use of the assets is restricted by terms of governing documents, and their liabilities are not our legal obligations. Repayment of their liabilities depends primarily on cash flows generated by their assets. Because we have ceased transferring assets to these entities, balances will decrease as the assets repay. Given their unique nature the entities have been classified in separate financial statement captions, "Consolidated, liquidating securitization entities." Accounting for securitization entities continues to develop, including the related display. We will reclassify our assets, liabilities and operations into the associated financial statement captions in second quarter 2004. We continue to engage in off-balance sheet securitization transactions with third party entities and to use public market, term securitizations.

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On-balance sheet arrangements

The following tables summarize the revenues, expenses, assets, liabilities and cash flows associated with securitization entities consolidated on July 1, 2003.

(In millions)	First quarter ended March 31, 2004

REVENUES
Interest on time sales and loans		$	267
Financing leases			42
Other			18

Total		$	327

EXPENSES
Interest		$	164
Costs and expenses			24
Minority interest		14

Total		$	202

	At

(In millions)	3/31/04			12/31/03
ASSETS
Cash		$	772		$	684
Debt securities			1,482			1,566
Financing receivables			19,214			21,877
Other			2,231			2,341

Total		$	23,699		$	26,468

LIABILITIES
Short-term borrowings		$	20,413		$	22,842
Long-term notes payable			1,622			1,948
Other liabilities			398			517
Minority interest			422			414

Total		$	22,855		$	25,721

(In millions)	First quarter ended March 31, 2004

CASH FLOWS - INVESTING ACTIVITIES
Net collections		$	2,544
Other			15

Total		$	2,559

CASH FLOWS - FINANCING ACTIVITIES
Newly issued debt		$	58,019
Repayments and other reductions		(60,774		)

Total		$	(2,755	)

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5. Intangible assets are summarized in the following table:

	At

(In millions)	3/31/04		12/31/03

Goodwill	$	21,945	$	19,741
Present value of future profits (PVFP)		1,168		1,259
Capitalized software		679		695
Other intangibles		889		915

Total	$	24,681	$	22,610



Intangible assets were net of accumulated amortization of $9,147 million at March 31, 2004, and $9,424 million at December 31, 2003.

INTANGIBLES SUBJECT TO AMORTIZATION
<

	At March 31, 2004								At December 31, 2003

(In millions)	Gross carrying amount		Accumulated amortization				Net		Gross carrying amount		Accumulated amortization				Net

Present value of future profits (PVFP)	$	2,841		$	(1,673	)	$	1,168	$	2,900		$	(1,641	)	$	1,259
Capitalized software		1,407			(728	)		679		1,348			(653	)		695