UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
þ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended September
30, 2009
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 001-00035
GENERAL ELECTRIC
COMPANY
(Exact
name of registrant as specified in its
charter)
|
New
York
|
|
14-0689340
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
3135
Easton Turnpike, Fairfield, CT
|
|
06828-0001
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
|
(Registrant’s
telephone number, including area code) (203)
373-2211
_______________________________________________
(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 þ No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer þ
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No þ
There
were 10,647,495,000 shares of common stock with a par value of $0.06 per share
outstanding at September 25, 2009.
|
|
Page
|
Part
I -
Financial Information
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
Condensed
Statement of Earnings
|
|
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
8
|
|
|
51
|
|
|
75
|
|
|
75
|
|
|
|
Part
II -
Other Information
|
|
|
|
|
|
Item 1. Legal Proceedings |
|
75 |
|
|
77
|
|
|
77
|
|
|
78
|
|
|
79
|
Forward-Looking
Statements
This
document contains “forward-looking statements” – that is, statements related to
future, not past, events. In this context, forward-looking statements often
address our expected future business and financial performance and financial
condition, and often contain words such as “expect,” “anticipate,” “intend,”
“plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their
nature address matters that are, to different degrees, uncertain. For us,
particular uncertainties that could cause our actual results to be materially
different than those expressed in our forward-looking statements include: the
severity and duration of current economic and financial conditions, including
volatility in interest and exchange rates, commodity and equity prices and the
value of financial assets; the impact of U.S. and foreign government programs to
restore liquidity and stimulate national and global economies; the impact of
conditions in the financial and credit markets on the availability and cost of
GE Capital’s funding and on our ability to reduce GE Capital’s asset levels as
planned; the impact of conditions in the housing market and unemployment rates
on the level of commercial and consumer credit defaults; our ability to maintain
our current credit rating and the impact on our funding costs and competitive
position if we do not do so; the soundness of other financial institutions with
which GE Capital does business; the adequacy of our cash flow and earnings and
other conditions which may affect our ability to maintain our quarterly dividend
at the current level; the level of demand and financial performance of the major
industries we serve, including, without limitation, air and rail transportation,
energy generation, network television, real estate and healthcare; the impact of
regulation and regulatory, investigative and legal proceedings and legal
compliance risks, including the impact of proposed financial services
regulation; strategic actions, including acquisitions and dispositions and our
success in integrating acquired businesses; and numerous other matters of
national, regional and global scale, including those of a political, economic,
business and competitive nature. These uncertainties may cause our actual future
results to be materially different than those expressed in our forward-looking
statements. We do not undertake to update our forward-looking
statements.
Part
I. Financial Information
Item
1. Financial Statements.
General
Electric Company and consolidated affiliates
Condensed
Statement of Earnings
|
Three
months ended September 30, 2009 (Unaudited)
|
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
(In
millions; except share amounts)
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of goods
|
$
|
14,627
|
|
$
|
17,924
|
|
|
$
|
14,486
|
|
$
|
17,473
|
|
$
|
213
|
|
$
|
579
|
Sales
of services
|
|
10,516
|
|
|
11,236
|
|
|
|
10,639
|
|
|
11,395
|
|
|
–
|
|
|
–
|
Other
income
|
|
438
|
|
|
544
|
|
|
|
476
|
|
|
659
|
|
|
–
|
|
|
–
|
GECS
earnings from continuing operations
|
|
–
|
|
|
–
|
|
|
|
133
|
|
|
2,010
|
|
|
–
|
|
|
–
|
GECS
revenues from services
|
|
12,218
|
|
|
17,530
|
|
|
|
–
|
|
|
–
|
|
|
12,533
|
|
|
17,852
|
Total
revenues
|
|
37,799
|
|
|
47,234
|
|
|
|
25,734
|
|
|
31,537
|
|
|
12,746
|
|
|
18,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
11,775
|
|
|
14,184
|
|
|
|
11,666
|
|
|
13,826
|
|
|
181
|
|
|
486
|
Cost
of services sold
|
|
6,773
|
|
|
7,953
|
|
|
|
6,897
|
|
|
8,112
|
|
|
–
|
|
|
–
|
Interest
and other financial charges
|
|
4,322
|
|
|
6,955
|
|
|
|
352
|
|
|
525
|
|
|
4,128
|
|
|
6,723
|
Investment
contracts, insurance losses and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
insurance
annuity benefits
|
|
732
|
|
|
787
|
|
|
|
–
|
|
|
–
|
|
|
785
|
|
|
839
|
Provision
for losses on financing receivables
|
|
2,868
|
|
|
1,641
|
|
|
|
–
|
|
|
–
|
|
|
2,868
|
|
|
1,641
|
Other
costs and expenses
|
|
9,354
|
|
|
10,542
|
|
|
|
3,714
|
|
|
3,541
|
|
|
5,781
|
|
|
7,093
|
Total
costs and expenses
|
|
35,824
|
|
|
42,062
|
|
|
|
22,629
|
|
|
26,004
|
|
|
13,743
|
|
|
16,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
1,975
|
|
|
5,172
|
|
|
|
3,105
|
|
|
5,533
|
|
|
(997)
|
|
|
1,649
|
Benefit
(provision) for income taxes
|
|
484
|
|
|
(539)
|
|
|
|
(654)
|
|
|
(996)
|
|
|
1,138
|
|
|
457
|
Earnings
from continuing operations
|
|
2,459
|
|
|
4,633
|
|
|
|
2,451
|
|
|
4,537
|
|
|
141
|
|
|
2,106
|
Earnings
(loss) from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes
|
|
40
|
|
|
(165)
|
|
|
|
40
|
|
|
(165)
|
|
|
40
|
|
|
(170)
|
Net
earnings
|
|
2,499
|
|
|
4,468
|
|
|
|
2,491
|
|
|
4,372
|
|
|
181
|
|
|
1,936
|
Less
net earnings (loss) attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling
interests
|
|
5
|
|
|
156
|
|
|
|
(3)
|
|
|
60
|
|
|
8
|
|
|
96
|
Net
earnings attributable to the Company
|
|
2,494
|
|
|
4,312
|
|
|
|
2,494
|
|
|
4,312
|
|
|
173
|
|
|
1,840
|
Preferred
stock dividends declared
|
|
(75)
|
|
|
–
|
|
|
|
(75)
|
|
|
–
|
|
|
–
|
|
|
–
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
|
$
|
2,419
|
|
$
|
4,312
|
|
|
$
|
2,419
|
|
$
|
4,312
|
|
$
|
173
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
2,454
|
|
$
|
4,477
|
|
|
$
|
2,454
|
|
$
|
4,477
|
|
$
|
133
|
|
$
|
2,010
|
Earnings
(loss) from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes
|
|
40
|
|
|
(165)
|
|
|
|
40
|
|
|
(165)
|
|
|
40
|
|
|
(170)
|
Net
earnings attributable to the Company
|
$
|
2,494
|
|
$
|
4,312
|
|
|
$
|
2,494
|
|
$
|
4,312
|
|
$
|
173
|
|
$
|
1,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.22
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.22
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.23
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.23
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
$
|
0.10
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents
the adding together of all affiliated companies except General Electric
Capital Services, Inc. (GECS or financial services) which is presented on
a one-line basis.
|
See
Note 3 for other-than-temporary impairment
amounts.
|
See
accompanying notes. Separate information is shown for “GE” and “Financial
Services (GECS).” Transactions between GE and GECS have been eliminated
from the “Consolidated” columns.
|
General
Electric Company and consolidated affiliates
Condensed
Statement of Earnings
|
Nine
months ended September 30, 2009 (Unaudited)
|
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
(In
millions; except share amounts)
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of goods
|
$
|
44,605
|
|
$
|
50,092
|
|
|
$
|
44,000
|
|
$
|
48,876
|
|
$
|
691
|
|
$
|
1,474
|
Sales
of services
|
|
30,743
|
|
|
31,489
|
|
|
|
31,159
|
|
|
32,024
|
|
|
–
|
|
|
–
|
Other
income
|
|
900
|
|
|
1,693
|
|
|
|
1,035
|
|
|
1,984
|
|
|
–
|
|
|
–
|
GECS
earnings from continuing operations
|
|
–
|
|
|
–
|
|
|
|
1,479
|
|
|
7,240
|
|
|
–
|
|
|
–
|
GECS
revenues from services
|
|
39,097
|
|
|
53,028
|
|
|
|
–
|
|
|
–
|
|
|
39,969
|
|
|
54,027
|
Total
revenues
|
|
115,345
|
|
|
136,302
|
|
|
|
77,673
|
|
|
90,124
|
|
|
40,660
|
|
|
55,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
35,658
|
|
|
39,977
|
|
|
|
35,175
|
|
|
38,971
|
|
|
569
|
|
|
1,264
|
Cost
of services sold
|
|
19,760
|
|
|
20,882
|
|
|
|
20,177
|
|
|
21,417
|
|
|
–
|
|
|
–
|
Interest
and other financial charges
|
|
14,302
|
|
|
20,103
|
|
|
|
1,076
|
|
|
1,681
|
|
|
13,717
|
|
|
19,242
|
Investment
contracts, insurance losses and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
insurance
annuity benefits
|
|
2,257
|
|
|
2,412
|
|
|
|
–
|
|
|
–
|
|
|
2,381
|
|
|
2,557
|
Provision
for losses on financing receivables
|
|
8,021
|
|
|
4,453
|
|
|
|
–
|
|
|
–
|
|
|
8,021
|
|
|
4,453
|
Other
costs and expenses
|
|
27,624
|
|
|
31,317
|
|
|
|
10,634
|
|
|
10,780
|
|
|
17,381
|
|
|
20,862
|
Total
costs and expenses
|
|
107,622
|
|
|
119,144
|
|
|
|
67,062
|
|
|
72,849
|
|
|
42,069
|
|
|
48,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
7,723
|
|
|
17,158
|
|
|
|
10,611
|
|
|
17,275
|
|
|
(1,409)
|
|
|
7,123
|
Benefit
(provision) for income taxes
|
|
566
|
|
|
(2,434)
|
|
|
|
(2,393)
|
|
|
(2,735)
|
|
|
2,959
|
|
|
301
|
Earnings
from continuing operations
|
|
8,289
|
|
|
14,724
|
|
|
|
8,218
|
|
|
14,540
|
|
|
1,550
|
|
|
7,424
|
Loss
from discontinued operations, net of taxes
|
|
(175)
|
|
|
(534)
|
|
|
|
(175)
|
|
|
(534)
|
|
|
(157)
|
|
|
(568)
|
Net
earnings
|
|
8,114
|
|
|
14,190
|
|
|
|
8,043
|
|
|
14,006
|
|
|
1,393
|
|
|
6,856
|
Less
net earnings attributable to noncontrolling interests
|
|
102
|
|
|
502
|
|
|
|
31
|
|
|
318
|
|
|
71
|
|
|
184
|
Net
earnings attributable to the Company
|
|
8,012
|
|
|
13,688
|
|
|
|
8,012
|
|
|
13,688
|
|
|
1,322
|
|
|
6,672
|
Preferred
stock dividends declared
|
|
(225)
|
|
|
–
|
|
|
|
(225)
|
|
|
–
|
|
|
–
|
|
|
–
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
|
$
|
7,787
|
|
$
|
13,688
|
|
|
$
|
7,787
|
|
$
|
13,688
|
|
$
|
1,322
|
|
$
|
6,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
8,187
|
|
$
|
14,222
|
|
|
$
|
8,187
|
|
$
|
14,222
|
|
$
|
1,479
|
|
$
|
7,240
|
Loss
from discontinued operations, net of taxes
|
|
(175)
|
|
|
(534)
|
|
|
|
(175)
|
|
|
(534)
|
|
|
(157)
|
|
|
(568)
|
Net
earnings attributable to the Company
|
$
|
8,012
|
|
$
|
13,688
|
|
|
$
|
8,012
|
|
$
|
13,688
|
|
$
|
1,322
|
|
$
|
6,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.75
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.75
|
|
$
|
1.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.73
|
|
$
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.73
|
|
$
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
$
|
0.51
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents
the adding together of all affiliated companies except General Electric
Capital Services, Inc. (GECS or financial services) which is presented on
a one-line basis.
|
See Note
3 for other-than-temporary impairment amounts.
See
accompanying notes. Separate information is shown for “GE” and “Financial
Services (GECS).” Transactions between GE and GECS have been eliminated from the
“Consolidated” columns.
General
Electric Company and consolidated affiliates
Condensed
Statement of Financial Position
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
|
September
30,
|
|
December
31,
|
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
(In
millions; except share amounts)
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and equivalents
|
$
|
61,374
|
|
$
|
48,187
|
|
|
$
|
5,207
|
|
$
|
12,090
|
|
$
|
56,898
|
|
$
|
37,486
|
Investment
securities
|
|
52,761
|
|
|
41,446
|
|
|
|
40
|
|
|
213
|
|
|
52,723
|
|
|
41,236
|
Current
receivables
|
|
19,613
|
|
|
21,411
|
|
|
|
12,872
|
|
|
15,064
|
|
|
–
|
|
|
–
|
Inventories
|
|
13,092
|
|
|
13,674
|
|
|
|
13,013
|
|
|
13,597
|
|
|
79
|
|
|
77
|
Financing
receivables – net
|
|
340,688
|
|
|
365,168
|
|
|
|
–
|
|
|
–
|
|
|
348,518
|
|
|
372,456
|
Other
GECS receivables
|
|
14,339
|
|
|
13,439
|
|
|
|
–
|
|
|
–
|
|
|
18,625
|
|
|
18,636
|
Property,
plant and equipment (including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment
leased to others) – net
|
|
72,993
|
|
|
78,530
|
|
|
|
14,281
|
|
|
14,433
|
|
|
58,712
|
|
|
64,097
|
Investment
in GECS
|
|
–
|
|
|
–
|
|
|
|
70,658
|
|
|
53,279
|
|
|
–
|
|
|
–
|
Goodwill
|
|
84,880
|
|
|
81,759
|
|
|
|
56,696
|
|
|
56,394
|
|
|
28,184
|
|
|
25,365
|
Other
intangible assets – net
|
|
15,010
|
|
|
14,977
|
|
|
|
11,172
|
|
|
11,364
|
|
|
3,838
|
|
|
3,613
|
All
other assets
|
|
110,235
|
|
|
106,899
|
|
|
|
23,787
|
|
|
22,435
|
|
|
87,941
|
|
|
85,721
|
Assets
of businesses held for sale
|
|
1,263
|
|
|
10,556
|
|
|
|
–
|
|
|
–
|
|
|
1,263
|
|
|
10,556
|
Assets
of discontinued operations
|
|
1,598
|
|
|
1,723
|
|
|
|
65
|
|
|
64
|
|
|
1,533
|
|
|
1,659
|
Total
assets
|
$
|
787,846
|
|
$
|
797,769
|
|
|
$
|
207,791
|
|
$
|
198,933
|
|
$
|
658,314
|
|
$
|
660,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
160,115
|
|
$
|
193,695
|
|
|
$
|
565
|
|
$
|
2,375
|
|
$
|
160,938
|
|
$
|
193,533
|
Accounts
payable, principally trade accounts
|
|
18,931
|
|
|
20,819
|
|
|
|
10,391
|
|
|
11,699
|
|
|
12,501
|
|
|
13,882
|
Progress
collections and price adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued
|
|
12,511
|
|
|
12,536
|
|
|
|
13,232
|
|
|
13,058
|
|
|
–
|
|
|
–
|
Other
GE current liabilities
|
|
19,229
|
|
|
21,560
|
|
|
|
19,229
|
|
|
21,624
|
|
|
–
|
|
|
–
|
Long-term
borrowings
|
|
358,092
|
|
|
330,067
|
|
|
|
11,683
|
|
|
9,827
|
|
|
347,415
|
|
|
321,068
|
Investment
contracts, insurance liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
insurance annuity benefits
|
|
32,549
|
|
|
34,032
|
|
|
|
–
|
|
|
–
|
|
|
32,948
|
|
|
34,369
|
All
other liabilities
|
|
53,708
|
|
|
64,796
|
|
|
|
32,813
|
|
|
32,767
|
|
|
21,021
|
|
|
32,090
|
Deferred
income taxes
|
|
5,308
|
|
|
4,584
|
|
|
|
(4,126)
|
|
|
(3,949)
|
|
|
9,434
|
|
|
8,533
|
Liabilities
of businesses held for sale
|
|
143
|
|
|
636
|
|
|
|
–
|
|
|
–
|
|
|
143
|
|
|
636
|
Liabilities
of discontinued operations
|
|
1,451
|
|
|
1,432
|
|
|
|
172
|
|
|
189
|
|
|
1,279
|
|
|
1,243
|
Total
liabilities
|
|
662,037
|
|
|
684,157
|
|
|
|
83,959
|
|
|
87,590
|
|
|
585,679
|
|
|
605,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock (30,000 shares outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
both
September 30, 2009 and December 31, 2008)
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
Common
stock (10,647,495,000 and 10,536,897,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding at September 30, 2009 and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008, respectively)
|
|
702
|
|
|
702
|
|
|
|
702
|
|
|
702
|
|
|
1
|
|
|
1
|
Accumulated
other comprehensive income – net(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
(479)
|
|
|
(3,094)
|
|
|
|
(479)
|
|
|
(3,094)
|
|
|
(478)
|
|
|
(3,097)
|
Currency
translation adjustments
|
|
4,043
|
|
|
(299)
|
|
|
|
4,043
|
|
|
(299)
|
|
|
1,409
|
|
|
(1,258)
|
Cash
flow hedges
|
|
(1,856)
|
|
|
(3,332)
|
|
|
|
(1,856)
|
|
|
(3,332)
|
|
|
(1,894)
|
|
|
(3,134)
|
Benefit
plans
|
|
(14,469)
|
|
|
(15,128)
|
|
|
|
(14,469)
|
|
|
(15,128)
|
|
|
(374)
|
|
|
(367)
|
Other
capital
|
|
37,861
|
|
|
40,390
|
|
|
|
37,861
|
|
|
40,390
|
|
|
27,578
|
|
|
18,079
|
Retained
earnings
|
|
124,530
|
|
|
122,123
|
|
|
|
124,530
|
|
|
122,123
|
|
|
44,416
|
|
|
43,055
|
Less
common stock held in treasury
|
|
(32,803)
|
|
|
(36,697)
|
|
|
|
(32,803)
|
|
|
(36,697)
|
|
|
–
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
GE shareowners’ equity
|
|
117,529
|
|
|
104,665
|
|
|
|
117,529
|
|
|
104,665
|
|
|
70,658
|
|
|
53,279
|
Noncontrolling
interests(c)
|
|
8,280
|
|
|
8,947
|
|
|
|
6,303
|
|
|
6,678
|
|
|
1,977
|
|
|
2,269
|
Total
equity
|
|
125,809
|
|
|
113,612
|
|
|
|
123,832
|
|
|
111,343
|
|
|
72,635
|
|
|
55,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
$
|
787,846
|
|
$
|
797,769
|
|
|
$
|
207,791
|
|
$
|
198,933
|
|
$
|
658,314
|
|
$
|
660,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents
the adding together of all affiliated companies except General Electric
Capital Services, Inc. (GECS or financial services) which is presented on
a one-line basis.
|
(b)
|
The
sum of accumulated other comprehensive income - net was $(12,761) million
and $(21,853) million at September 30, 2009 and December 31, 2008,
respectively.
|
(c)
|
Included
accumulated other comprehensive income attributable to noncontrolling
interests of $(83) million and $(194) million at September 30, 2009 and
December 31, 2008, respectively.
|
General
Electric Company and consolidated affiliates
Condensed
Statement of Cash Flows
|
Nine
months ended September 30 (Unaudited)
|
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
(In
millions)
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows – operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to the Company
|
$
|
8,012
|
|
$
|
13,688
|
|
|
$
|
8,012
|
|
$
|
13,688
|
|
$
|
1,322
|
|
$
|
6,672
|
Loss
from discontinued operations
|
|
175
|
|
|
534
|
|
|
|
175
|
|
|
534
|
|
|
157
|
|
|
568
|
Adjustments
to reconcile net earnings attributable to the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
to cash provided from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plant
and equipment
|
|
7,893
|
|
|
8,216
|
|
|
|
1,696
|
|
|
1,587
|
|
|
6,197
|
|
|
6,629
|
Earnings
from continuing operations retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
GECS
|
|
–
|
|
|
–
|
|
|
|
(1,479)
|
|
|
(4,949)
|
|
|
–
|
|
|
–
|
Deferred
income taxes
|
|
281
|
|
|
1,798
|
|
|
|
(179)
|
|
|
(454)
|
|
|
460
|
|
|
2,252
|
Decrease
(increase) in GE current receivables
|
|
2,181
|
|
|
(1,344)
|
|
|
|
2,330
|
|
|
41
|
|
|
–
|
|
|
–
|
Decrease
(increase) in inventories
|
|
350
|
|
|
(1,765)
|
|
|
|
412
|
|
|
(1,624)
|
|
|
(2)
|
|
|
(10)
|
Increase
(decrease) in accounts payable
|
|
(1,355)
|
|
|
(411)
|
|
|
|
(869)
|
|
|
444
|
|
|
(1,288)
|
|
|
(669)
|
Increase
(decrease) in GE progress collections
|
|
(194)
|
|
|
3,103
|
|
|
|
5
|
|
|
3,241
|
|
|
–
|
|
|
–
|
Provision
for losses on GECS financing receivables
|
|
8,021
|
|
|
4,453
|
|
|
|
–
|
|
|
–
|
|
|
8,021
|
|
|
4,453
|
All
other operating activities
|
|
(11,351)
|
|
|
(468)
|
|
|
|
1,362
|
|
|
1,127
|
|
|
(12,898)
|
|
|
(1,751)
|
Cash
from (used for) operating activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
14,013
|
|
|
27,804
|
|
|
|
11,465
|
|
|
13,635
|
|
|
1,969
|
|
|
18,144
|
Cash
from (used for) operating activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
(62)
|
|
|
497
|
|
|
|
(2)
|
|
|
(9)
|
|
|
(60)
|
|
|
506
|
Cash
from (used for) operating activities
|
|
13,951
|
|
|
28,301
|
|
|
|
11,463
|
|
|
13,626
|
|
|
1,909
|
|
|
18,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows – investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
(5,808)
|
|
|
(11,484)
|
|
|
|
(1,770)
|
|
|
(2,263)
|
|
|
(4,231)
|
|
|
(9,468)
|
Dispositions
of property, plant and equipment
|
|
3,689
|
|
|
7,286
|
|
|
|
–
|
|
|
–
|
|
|
3,689
|
|
|
7,286
|
Net
decrease (increase) in GECS financing receivables
|
|
37,117
|
|
|
(26,898)
|
|
|
|
–
|
|
|
–
|
|
|
36,953
|
|
|
(28,359)
|
Proceeds
from sales of discontinued operations
|
|
–
|
|
|
5,423
|
|
|
|
–
|
|
|
203
|
|
|
–
|
|
|
5,220
|
Proceeds
from principal business dispositions
|
|
9,676
|
|
|
4,480
|
|
|
|
858
|
|
|
58
|
|
|
8,818
|
|
|
4,422
|
Payments
for principal businesses purchased
|
|
(5,994)
|
|
|
(27,042)
|
|
|
|
(357)
|
|
|
(2,053)
|
|
|
(5,637)
|
|
|
(24,989)
|
Capital
contribution from GE to GECS
|
|
–
|
|
|
–
|
|
|
|
(9,500)
|
|
|
–
|
|
|
–
|
|
|
–
|
All
other investing activities
|
|
(3,938)
|
|
|
(3,283)
|
|
|
|
(2)
|
|
|
(56)
|
|
|
(3,012)
|
|
|
(2,948)
|
Cash
from (used for) investing activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
34,742
|
|
|
(51,518)
|
|
|
|
(10,771)
|
|
|
(4,111)
|
|
|
36,580
|
|
|
(48,836)
|
Cash
from (used for) investing activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
66
|
|
|
(616)
|
|
|
|
2
|
|
|
9
|
|
|
64
|
|
|
(625)
|
Cash
from (used for) investing activities
|
|
34,808
|
|
|
(52,134)
|
|
|
|
(10,769)
|
|
|
(4,102)
|
|
|
36,644
|
|
|
(49,461)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows – financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in borrowings (maturities of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
days or less)
|
|
(32,788)
|
|
|
(18,298)
|
|
|
|
(12)
|
|
|
(1,719)
|
|
|
(33,600)
|
|
|
(16,949)
|
Newly
issued debt (maturities longer than 90 days)
|
|
73,898
|
|
|
99,373
|
|
|
|
1,825
|
|
|
122
|
|
|
72,251
|
|
|
99,228
|
Repayments
and other reductions (maturities longer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
than
90 days)
|
|
(67,007)
|
|
|
(45,055)
|
|
|
|
(1,598)
|
|
|
(145)
|
|
|
(65,409)
|
|
|
(44,910)
|
Net
dispositions (purchases) of GE shares for treasury
|
|
498
|
|
|
(1,678)
|
|
|
|
498
|
|
|
(1,678)
|
|
|
–
|
|
|
–
|
Dividends
paid to shareowners
|
|
(7,845)
|
|
|
(9,308)
|
|
|
|
(7,845)
|
|
|
(9,308)
|
|
|
–
|
|
|
(2,291)
|
Capital
contribution from GE to GECS
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
9,500
|
|
|
–
|
All
other financing activities
|
|
(2,324)
|
|
|
(750)
|
|
|
|
(445)
|
|
|
–
|
|
|
(1,879)
|
|
|
(750)
|
Cash
from (used for) financing activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
(35,568)
|
|
|
24,284
|
|
|
|
(7,577)
|
|
|
(12,728)
|
|
|
(19,137)
|
|
|
34,328
|
Cash
from (used for) financing activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
–
|
|
|
(4)
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
(4)
|
Cash
from (used for) financing activities
|
|
(35,568)
|
|
|
24,280
|
|
|
|
(7,577)
|
|
|
(12,728)
|
|
|
(19,137)
|
|
|
34,324
|
Increase
(decrease) in cash and equivalents
|
|
13,191
|
|
|
447
|
|
|
|
(6,883)
|
|
|
(3,204)
|
|
|
19,416
|
|
|
3,513
|
Cash
and equivalents at beginning of year
|
|
48,367
|
|
|
16,031
|
|
|
|
12,090
|
|
|
6,702
|
|
|
37,666
|
|
|
9,739
|
Cash
and equivalents at September 30
|
|
61,558
|
|
|
16,478
|
|
|
|
5,207
|
|
|
3,498
|
|
|
57,082
|
|
|
13,252
|
Less
cash and equivalents of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
September 30
|
|
184
|
|
|
177
|
|
|
|
–
|
|
|
–
|
|
|
184
|
|
|
177
|
Cash
and equivalents of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
September 30
|
$
|
61,374
|
|
$
|
16,301
|
|
|
$
|
5,207
|
|
$
|
3,498
|
|
$
|
56,898
|
|
$
|
13,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents
the adding together of all affiliated companies except General Electric
Capital Services, Inc. (GECS or financial services) which is presented on
a one-line basis.
|
General
Electric Company and consolidated affiliates
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
|
(Unaudited)
|
|
(Unaudited)
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
8,917
|
|
$
|
9,769
|
|
$
|
26,733
|
|
$
|
27,164
|
Technology
Infrastructure
|
|
10,209
|
|
|
11,450
|
|
|
31,200
|
|
|
33,761
|
NBC
Universal
|
|
4,079
|
|
|
5,073
|
|
|
11,168
|
|
|
12,539
|
Capital
Finance
|
|
12,161
|
|
|
17,292
|
|
|
38,100
|
|
|
52,242
|
Consumer
& Industrial
|
|
2,438
|
|
|
2,989
|
|
|
7,166
|
|
|
8,990
|
Total
segment revenues
|
|
37,804
|
|
|
46,573
|
|
|
114,367
|
|
|
134,696
|
Corporate
items and eliminations
|
|
(5)
|
|
|
661
|
|
|
978
|
|
|
1,606
|
Consolidated
revenues
|
$
|
37,799
|
|
$
|
47,234
|
|
$
|
115,345
|
|
$
|
136,302
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit(a)
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
1,582
|
|
$
|
1,425
|
|
$
|
4,646
|
|
$
|
4,074
|
Technology
Infrastructure
|
|
1,748
|
|
|
1,900
|
|
|
5,384
|
|
|
5,657
|
NBC
Universal
|
|
732
|
|
|
645
|
|
|
1,662
|
|
|
2,266
|
Capital
Finance
|
|
263
|
|
|
2,020
|
|
|
2,008
|
|
|
7,602
|
Consumer
& Industrial
|
|
117
|
|
|
47
|
|
|
264
|
|
|
329
|
Total
segment profit
|
|
4,442
|
|
|
6,037
|
|
|
13,964
|
|
|
19,928
|
Corporate
items and eliminations
|
|
(982)
|
|
|
(39)
|
|
|
(2,308)
|
|
|
(1,290)
|
GE
interest and other financial charges
|
|
(352)
|
|
|
(525)
|
|
|
(1,076)
|
|
|
(1,681)
|
GE
provision for income taxes
|
|
(654)
|
|
|
(996)
|
|
|
(2,393)
|
|
|
(2,735)
|
Earnings
from continuing operations attributable
|
|
|
|
|
|
|
|
|
|
|
|
to the
Company
|
|
2,454
|
|
|
4,477
|
|
|
8,187
|
|
|
14,222
|
Earnings
(loss) from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes, attributable to the Company
|
|
40
|
|
|
(165)
|
|
|
(175)
|
|
|
(534)
|
Consolidated
net earnings attributable to
|
|
|
|
|
|
|
|
|
|
|
|
the
Company
|
$
|
2,494
|
|
$
|
4,312
|
|
$
|
8,012
|
|
$
|
13,688
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Segment
profit always excludes the effects of principal pension plans, results
reported as discontinued operations, earnings attributable to
noncontrolling interests of consolidated subsidiaries and accounting
changes, and may exclude matters such as charges for restructuring;
rationalization and other similar expenses; in-process research and
development and certain other acquisition-related charges and balances;
technology and product development costs; certain gains and losses from
acquisitions or dispositions; and litigation settlements or other charges,
responsibility for which preceded the current management team. Segment
profit excludes or includes interest and other financial charges and
income taxes according to how a particular segment’s management is
measured – excluded in determining segment profit, which we sometimes
refer to as “operating profit,” for Energy Infrastructure, Technology
Infrastructure, NBC Universal and Consumer & Industrial; included in
determining segment profit, which we sometimes refer to as “net earnings,”
for Capital Finance.
|
See
accompanying notes to condensed, consolidated financial statements.
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying condensed, consolidated financial statements represent the
consolidation of General Electric Company and all companies that we directly or
indirectly control, either through majority ownership or otherwise. See Note 1
to the consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2008 (2008 Form 10-K), which discusses our
consolidation and financial statement presentation. As used in this report on
Form 10-Q (Report) and in our Annual Report on Form 10-K, “GE” represents the
adding together of all affiliated companies except General Electric Capital
Services, Inc. (GECS or financial services), which is presented on a one-line
basis; GECS consists of General Electric Capital Services, Inc. and all of its
affiliates; and “Consolidated” represents the adding together of GE and GECS
with the effects of transactions between the two eliminated. GE includes Energy
Infrastructure, Technology Infrastructure, NBC Universal and Consumer &
Industrial. GECS includes Capital Finance. We have reclassified certain
prior-period amounts to conform to the current-period’s presentation. Unless
otherwise indicated, information in these notes to condensed, consolidated
financial statements relates to continuing operations.
The
Financial Accounting Standards Board (FASB) issued FASB Accounting Standards
Codification (ASC) effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The ASC is an aggregation of
previously issued authoritative U.S. generally accepted accounting principles
(GAAP) in one comprehensive set of guidance organized by subject area. In
accordance with the ASC, references to previously issued accounting standards
have been replaced by ASC references. Subsequent revisions to GAAP will be
incorporated into the ASC through Accounting Standards Updates
(ASU).
We
adopted FASB ASC 820, Fair
Value Measurements and Disclosures, in two steps; effective January 1,
2008, we adopted it for all financial instruments and non-financial instruments
accounted for at fair value on a recurring basis and effective January 1, 2009,
for all non-financial instruments accounted for at fair value on a non-recurring
basis. This guidance establishes a new framework for measuring fair value and
expands related disclosures. See Note 14.
On
January 1, 2009, we adopted an amendment to FASB ASC 805, Business Combinations. This
amendment significantly changed the accounting for business acquisitions both
during the period of the acquisition and in subsequent periods. Among the more
significant changes in the accounting for acquisitions are the
following:
·
|
Acquired
in-process research and development (IPR&D) is accounted for as an
asset, with the cost recognized as the research and development is
realized or abandoned. IPR&D was previously expensed at the time of
the acquisition.
|
·
|
Contingent
consideration is recorded at fair value as an element of purchase price
with subsequent adjustments recognized in operations. Contingent
consideration was previously accounted for as a subsequent adjustment of
purchase price.
|
·
|
Subsequent
decreases in valuation allowances on acquired deferred tax assets are
recognized in operations after the measurement period. Such changes were
previously considered to be subsequent changes in consideration and were
recorded as decreases in goodwill.
|
·
|
Transaction
costs are expensed. These costs were previously treated as costs of the
acquisition.
|
In April
2009, the FASB amended FASB ASC 805 and changed the previous accounting for
assets and liabilities arising from contingencies in a business combination. We
adopted this amendment retrospectively effective January 1, 2009. The amendment
requires pre-acquisition contingencies to be recognized at fair value, if fair
value can be determined or reasonably estimated during the measurement period.
If fair value cannot be determined or reasonably estimated, the standard
requires measurement based on the recognition and measurement criteria of FASB
ASC 450, Contingencies.
On
January 1, 2009, we adopted an amendment to FASB ASC 810, Consolidation, which requires
us to make certain changes to the presentation of our financial statements. This
amendment requires us to classify noncontrolling interests (previously referred
to as “minority interest”) as part of consolidated net earnings ($5 million and
$156 million for the three months ended September 30, 2009 and 2008,
respectively, and $102 million and $502 million for the nine months ended
September 30, 2009 and 2008, respectively) and to include the accumulated amount
of noncontrolling interests as part of shareowners' equity ($8,280 million and
$8,947 million at September 30, 2009 and December 31, 2008, respectively). The
net earnings amounts we have previously reported are now presented as "Net
earnings attributable to the Company" and, as required, earnings per share
continues to reflect amounts attributable only to the Company. Similarly, in our
presentation of shareowners’ equity, we distinguish between equity amounts
attributable to GE shareowners and amounts attributable to the noncontrolling
interests – previously classified as minority interest outside of shareowners’
equity. Beginning January 1, 2009, dividends to noncontrolling interests are
classified as financing cash flows. In addition to these financial reporting
changes, this guidance provides for significant changes in accounting related to
noncontrolling interests; specifically, increases and decreases in our
controlling financial interests in consolidated subsidiaries will be reported in
equity similar to treasury stock transactions. If a change in ownership of a
consolidated subsidiary results in loss of control and deconsolidation, any
retained ownership interests are remeasured with the gain or loss reported in
net earnings.
Effective
January 1, 2009, we adopted FASB ASC 808, Collaborative Arrangements,
which requires gross basis presentation of revenues and expenses for principal
participants in collaborative arrangements. Our Technology Infrastructure and
Energy Infrastructure segments enter into collaborative arrangements with
manufacturers and suppliers of components used to build and maintain certain
engines, aero-derivatives, and turbines, under which GE and these participants
share in risks and rewards of these product programs. Adoption of the standard
had no effect as our historical presentation had been consistent with the new
requirements.
Effective
April 1, 2009, the FASB amended ASC 820 in relation to determining fair value
when the volume and level of activity for an asset or liability have
significantly decreased and identifying transactions that are not orderly.
Adoption of this amendment had an insignificant effect on our financial
statements.
Effective
April 1, 2009, the FASB amended ASC 320, Investments – Debt and Equity
Securities. See Note 3. This amendment modified the existing model for
recognition and measurement of impairment for debt securities. The two principal
changes to the impairment model for securities are as follows:
·
|
Recognition
of an other-than-temporary impairment charge for debt securities is
required if any of these conditions are met: (1) we do not expect to
recover the entire amortized cost basis of the security, (2) we intend to
sell the security or (3) it is more likely than not that we will be
required to sell the security before we recover its amortized cost
basis.
|
·
|
If
the first condition above is met, but we do not intend to sell and it is
not more likely than not that we will be required to sell the security
before recovery of its amortized cost basis, we would be required to
record the difference between the security’s amortized cost basis and its
recoverable amount in earnings and the difference between the security’s
recoverable amount and fair value in other comprehensive income. If either
the second or third criteria are met, then we would be required to
recognize the entire difference between the security’s amortized cost
basis and its fair value in
earnings.
|
Interim
Period Presentation
The
condensed, consolidated 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 our
results of operations, financial position and cash flows. We have evaluated
subsequent events that have occurred through November 2, 2009, the date of
financial statement issuance. The results reported in these condensed,
consolidated financial statements should not be regarded as necessarily
indicative of results that may be expected for the entire year. It is suggested
that these condensed, consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in our 2008 Form 10-K.
We label our quarterly information using a calendar convention, that is, first
quarter is labeled as ending on March 31, second quarter as ending on June 30,
and third quarter as ending on September 30. It is our longstanding practice to
establish interim quarterly closing dates using a fiscal calendar, which
requires our businesses to close their books on either a Saturday or Sunday,
depending on the business. The effects of this practice are modest and only
exist within a reporting year. The fiscal closing calendar from 1993 through
2013 is available on our website, www.ge.com/secreports.
Discontinued
operations comprised GE Money Japan (our Japanese personal loan business, Lake,
and our Japanese mortgage and card businesses, excluding our investment in GE
Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), Plastics, Advanced
Materials, GE Life, Genworth Financial, Inc. (Genworth) and most of GE Insurance
Solutions Corporation (GE Insurance Solutions). Associated results of
operations, financial position and cash flows are separately reported as
discontinued operations for all periods presented.
GE
Money Japan
During
the third quarter of 2007, we committed to a plan to sell Lake upon determining
that, despite restructuring, Japanese regulatory limits for interest charges on
unsecured personal loans did not permit us to earn an acceptable return. During
the third quarter of 2008, we completed the sale of GE Money Japan, which
included Lake, along with our Japanese mortgage and card businesses, excluding
our investment in GE Nissen Credit Co., Ltd. As a result, we recognized an
after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361
million. In connection with the transaction, GE Money Japan reduced the proceeds
on the sale for estimated interest refund claims in excess of the statutory
interest rate. Proceeds from the sale may be increased or decreased based on the
actual claims experienced in accordance with terms specified in the agreement,
and will not be adjusted unless claims exceed approximately $3,000 million.
During the second quarter of 2009, we accrued $132 million, which represents the
amount by which we expect claims to exceed those levels and is based on our
historical and recent claims experience and the estimated future requests,
taking into consideration the ability and likelihood of customers to make claims
and other industry risk factors. Uncertainties around the status of laws and
regulations and lack of certain information related to the individual customers
make it difficult to develop a meaningful estimate of the aggregate claims
exposure. We will continue to review our estimated exposure quarterly, and make
adjustments when required. GE Money Japan revenues from discontinued operations
were an insignificant amount and $209 million in the third quarters of 2009 and
2008, respectively, and an insignificant amount and $760 million in the first
nine months of 2009 and 2008, respectively. In total, GE Money Japan losses from
discontinued operations, net of taxes, were $10 million and $160 million in the
third quarters of 2009 and 2008, respectively, and $142 million and $508 million
in the first nine months of 2009 and 2008, respectively.
WMC
During
the fourth quarter of 2007, we completed the sale of our U.S. mortgage business.
In connection with the transaction, WMC retained certain obligations related to
loans sold prior to the disposal of the business, including WMC’s contractual
obligations to repurchase previously sold loans as to which there was an early
payment default or with respect to which certain contractual representations and
warranties were not met. Reserves related to these obligations were $212 million
at September 30, 2009, and $244 million at December 31, 2008. The amount of
these reserves is based upon pending and estimated future loan repurchase
requests, the estimated percentage of loans validly tendered for repurchase, and
our estimated losses on loans repurchased. Based on our historical experience,
we estimate that a small percentage of the total loans we originated and sold
will be tendered for repurchase, and of those tendered, only a limited amount
will qualify as “validly tendered,” meaning the loans sold did not satisfy
specified contractual obligations. The amount of our current reserve represents
our best estimate of losses with respect to our repurchase obligations. However,
actual losses could exceed our reserve amount if actual claim rates, valid
tenders or losses we incur on repurchased loans are higher than historically
observed. WMC revenues from discontinued operations were $4 million and $(7)
million in the third quarters of 2009 and 2008, respectively, and $(5) million
and $(64) million in the first nine months of 2009 and 2008, respectively. In
total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $3
million and $(8) million in the third quarters of 2009 and 2008, respectively,
and $(8) million and $(35) million in the first nine months of 2009 and 2008,
respectively.
GE
industrial earnings (loss) from discontinued operations, net of taxes, were an
insignificant amount and $5 million in the third quarters of 2009 and 2008,
respectively, and $(18) million and $34 million in the first nine months of 2009
and 2008, respectively.
Assets
of GE industrial discontinued operations were $65 million and $64 million at
September 30, 2009 and December 31, 2008, respectively. Liabilities of GE
industrial discontinued operations were $172 million and $189 million at
September 30, 2009, and December 31, 2008, respectively, and primarily represent
taxes payable and pension liabilities related to the sale of our Plastics
business in 2007.
Summarized
financial information for discontinued GECS operations is shown
below.
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
4
|
|
$
|
202
|
|
$
|
(4)
|
|
$
|
696
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
$
|
11
|
|
$
|
(207)
|
|
$
|
(102)
|
|
$
|
(516)
|
Income
tax benefit (expense)
|
|
(16)
|
|
|
50
|
|
|
27
|
|
|
193
|
Loss
from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes
|
$
|
(5)
|
|
$
|
(157)
|
|
$
|
(75)
|
|
$
|
(323)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on disposal before income taxes
|
$
|
(53)
|
|
$
|
(1,277)
|
|
$
|
(176)
|
|
$
|
(1,499)
|
Income
tax benefit
|
|
98
|
|
|
1,264
|
|
|
94
|
|
|
1,254
|
Earnings
(loss) on disposal, net of taxes
|
$
|
45
|
|
$
|
(13)
|
|
$
|
(82)
|
|
$
|
(245)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes(a)
|
$
|
40
|
|
$
|
(170)
|
|
$
|
(157)
|
|
$
|
(568)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The
sum of GE industrial earnings (loss) from discontinued operations, net of
taxes, and GECS earnings (loss) from discontinued operations, net of
taxes, are reported as GE industrial earnings (loss) from discontinued
operations, net of taxes, on the Condensed Statement of
Earnings.
|
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Cash
and equivalents
|
$
|
184
|
|
$
|
180
|
All
other assets
|
|
13
|
|
|
19
|
Other
|
|
1,336
|
|
|
1,460
|
Assets
of discontinued operations
|
$
|
1,533
|
|
$
|
1,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Liabilities
of discontinued operations
|
$
|
1,279
|
|
$
|
1,243
|
Assets
at September 30, 2009 and December 31, 2008, primarily comprised a deferred tax
asset for a loss carryforward, which expires in 2015, related to the sale of our
GE Money Japan business.
The vast
majority of our investment securities are classified as available-for-sale and
comprise mainly investment-grade debt securities supporting obligations to
annuitants and policyholders in our run-off insurance operations and holders of
guaranteed investment contracts.
|
At
|
|
September
30, 2009
|
|
December
31, 2008
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Estimated
|
|
Amortized
|
|
unrealized
|
|
unrealized
|
|
Estimated
|
(In
millions)
|
cost
|
|
gains
|
|
losses
|
|
fair
value
|
|
cost
|
|
gains
|
|
losses
|
|
fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
– U.S. corporate
|
$
|
25
|
|
$
|
–
|
|
$
|
–
|
|
$
|
25
|
|
$
|
182
|
|
$
|
–
|
|
$
|
–
|
|
$
|
182
|
Equity
– available-for-sale
|
|
15
|
|
|
1
|
|
|
(1)
|
|
|
15
|
|
|
32
|
|
|
–
|
|
|
(1)
|
|
|
31
|
|
|
40
|
|
|
1
|
|
|
(1)
|
|
|
40
|
|
|
214
|
|
|
–
|
|
|
(1)
|
|
|
213
|
GECS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
|
22,909
|
|
|
1,435
|
|
|
(957)
|
|
|
23,387
|
|
|
22,183
|
|
|
512
|
|
|
(2,477)
|
|
|
20,218
|
State
and municipal
|
|
2,281
|
|
|
71
|
|
|
(218)
|
|
|
2,134
|
|
|
1,556
|
|
|
19
|
|
|
(94)
|
|
|
1,481
|
Residential
mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
backed(a)
|
|
4,223
|
|
|
96
|
|
|
(882)
|
|
|
3,437
|
|
|
5,326
|
|
|
70
|
|
|
(1,052)
|
|
|
4,344
|
Commercial
mortgage-backed
|
|
3,001
|
|
|
83
|
|
|
(541)
|
|
|
2,543
|
|
|
2,910
|
|
|
14
|
|
|
(788)
|
|
|
2,136
|
Asset-backed
|
|
3,029
|
|
|
42
|
|
|
(339)
|
|
|
2,732
|
|
|
3,173
|
|
|
3
|
|
|
(691)
|
|
|
2,485
|
Corporate
– non-U.S.
|
|
1,703
|
|
|
63
|
|
|
(53)
|
|
|
1,713
|
|
|
1,441
|
|
|
14
|
|
|
(166)
|
|
|
1,289
|
Government
– non-U.S.
|
|
3,321
|
|
|
61
|
|
|
(12)
|
|
|
3,370
|
|
|
1,300
|
|
|
61
|
|
|
(19)
|
|
|
1,342
|
U.S.
government and federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency
|
|
3,492
|
|
|
66
|
|
|
–
|
|
|
3,558
|
|
|
739
|
|
|
65
|
|
|
(100)
|
|
|
704
|
Retained
interests(b)(c)
|
|
8,245
|
|
|
248
|
|
|
(75)
|
|
|
8,418
|
|
|
6,395
|
|
|
113
|
|
|
(152)
|
|
|
6,356
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
588
|
|
|
198
|
|
|
(14)
|
|
|
772
|
|
|
629
|
|
|
24
|
|
|
(160)
|
|
|
493
|
Trading
|
|
659
|
|
|
–
|
|
|
–
|
|
|
659
|
|
|
388
|
|
|
–
|
|
|
–
|
|
|
388
|
|
|
53,451
|
|
|
2,363
|
|
|
(3,091)
|
|
|
52,723
|
|
|
46,040
|
|
|
895
|
|
|
(5,699)
|
|
|
41,236
|
Eliminations
|
|
(2)
|
|
|
–
|
|
|
–
|
|
|
(2)
|
|
|
(7)
|
|
|
–
|
|
|
4
|
|
|
(3)
|
Total
|
$
|
53,489
|
|
$
|
2,364
|
|
$
|
(3,092)
|
|
$
|
52,761
|
|
$
|
46,247
|
|
$
|
895
|
|
$
|
(5,696)
|
|
$
|
41,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially collateralized by
U.S. mortgages.
|
(b)
|
Included $1,846 million and $1,752
million of retained interests at September 30, 2009 and December 31, 2008,
respectively, accounted for at fair value in accordance with FASB ASC 815,
Derivatives
and Hedging. See Note
16.
|
(c)
|
Amortized cost and estimated fair
value included $23 million and $20 million of trading securities at
September 30, 2009 and December 31, 2008,
respectively.
|
The
following tables present the estimated fair values and gross unrealized losses
of our available-for-sale investment securities.
|
In
loss position for
|
|
Less
than 12 months
|
|
12
months or more
|
|
|
|
Gross
|
|
|
|
Gross
|
|
Estimated
|
unrealized
|
Estimated
|
unrealized
|
(In
millions)
|
fair
value
|
losses
|
fair
value
|
losses
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
1,779
|
|
$
|
(60)
|
|
$
|
5,276
|
|
$
|
(897)
|
State
and municipal
|
|
388
|
|
|
(120)
|
|
|
512
|
|
|
(98)
|
Residential
mortgage-backed
|
|
211
|
|
|
(23)
|
|
|
1,753
|
|
|
(859)
|
Commercial
mortgage-backed
|
|
10
|
|
|
(2)
|
|
|
1,362
|
|
|
(539)
|
Asset-backed
|
|
96
|
|
|
(4)
|
|
|
1,427
|
|
|
(335)
|
Corporate
– non-U.S.
|
|
248
|
|
|
(13)
|
|
|
521
|
|
|
(40)
|
Government
– non-U.S.
|
|
1,078
|
|
|
(7)
|
|
|
254
|
|
|
(5)
|
U.S.
government and federal agency
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
Retained
interests
|
|
442
|
|
|
(28)
|
|
|
108
|
|
|
(47)
|
Equity
|
|
128
|
|
|
(9)
|
|
|
32
|
|
|
(6)
|
Total
|
$
|
4,380
|
|
$
|
(266)
|
|
$
|
11,245
|
|
$
|
(2,826)
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
6,602
|
|
$
|
(1,108)
|
|
$
|
5,629
|
|
$
|
(1,369)
|
State
and municipal
|
|
570
|
|
|
(44)
|
|
|
278
|
|
|
(50)
|
Residential
mortgage-backed
|
|
1,355
|
|
|
(107)
|
|
|
1,614
|
|
|
(945)
|
Commercial
mortgage-backed
|
|
774
|
|
|
(184)
|
|
|
1,218
|
|
|
(604)
|
Asset-backed
|
|
1,064
|
|
|
(419)
|
|
|
1,063
|
|
|
(272)
|
Corporate
– non-U.S.
|
|
454
|
|
|
(106)
|
|
|
335
|
|
|
(60)
|
Government
– non-U.S.
|
|
88
|
|
|
(4)
|
|
|
275
|
|
|
(15)
|
U.S.
government and federal agency
|
|
–
|
|
|
–
|
|
|
150
|
|
|
(100)
|
Retained
interests
|
|
1,403
|
|
|
(71)
|
|
|
274
|
|
|
(81)
|
Equity
|
|
268
|
|
|
(153)
|
|
|
9
|
|
|
(4)
|
Total
|
$
|
12,578
|
|
$
|
(2,196)
|
|
$
|
10,845
|
|
$
|
(3,500)
|
We
regularly review investment securities for impairment using both qualitative and
quantitative criteria. We presently do not intend to sell our debt securities
and believe that it is not more likely than not that we will be required to sell
these securities that are in an unrealized loss position before recovery of our
amortized cost. We believe that the unrealized loss associated with our equity
securities will be recovered within the foreseeable future.
The vast
majority of our U.S. corporate debt securities are rated investment grade by the
major rating agencies. We evaluate U.S. corporate debt securities based on a
variety of factors such as the financial health of and specific prospects for
the issuer, including whether the issuer is in compliance with the terms and
covenants of the security. In the event a U.S. corporate debt security is deemed
to be other-than-temporarily impaired, we isolate the credit portion of the
impairment by comparing the present value of our expectation of cash flows to
the amortized cost of the security. We discount the cash flows using the
original effective interest rate of the security.
The vast
majority of our residential mortgage-backed securities (RMBS) have
investment-grade credit ratings from the major rating agencies and are in a
senior position in the capital structure of the deal. Of our total RMBS at
September 30, 2009 and December 31, 2008, approximately $984 million and $1,310
million, respectively, relate to residential subprime credit, primarily
supporting our guaranteed investment contracts. These are collateralized
primarily by pools of individual, direct mortgage loans (a majority of which
were originated in 2006 and 2005), not other structured products such as
collateralized debt obligations. In addition, of the total residential subprime
credit exposure at September 30, 2009 and December 31, 2008, approximately $840
million and $1,093 million, respectively, was insured by monoline
insurers.
Substantially
all of our commercial mortgage-backed securities (CMBS) also have
investment-grade credit ratings from the major rating agencies and are in a
senior position in the capital structure of the deal. Our CMBS investments are
collateralized by both diversified pools of mortgages that were originated for
securitization (conduit CMBS) and pools of large loans backed by high quality
properties (large loan CMBS), a majority of which were originated in 2006 and
2007.
For
asset-backed securities, including RMBS, we estimate the portion of loss
attributable to credit using a discounted cash flow model that considers
estimates of cash flows generated from the underlying collateral. Estimates of
cash flows consider internal credit risk, interest rate and prepayment
assumptions that incorporate management’s best estimate of key assumptions,
including default rates, loss severity and prepayment rates. For CMBS, we
estimate the portion of loss attributable to credit by evaluating potential
losses on each of the underlying loans in the security. Collateral cash flows
are considered in the context of our position in the capital structure of the
deal. Assumptions can vary widely depending upon the collateral type, geographic
concentrations and vintage.
If there
has been an adverse change in cash flows for RMBS, management considers credit
enhancements such as monoline insurance (which are features of a specific
security). In evaluating the overall credit worthiness of the Monoline, we use
an analysis that is similar to the approach we use for corporate bonds,
including an evaluation of the sufficiency of the Monoline’s cash reserves and
capital, ratings activity, whether the Monoline is in default or default appears
imminent, and the potential for intervention by an insurance or other
regulator.
During
the three months ended September 30, 2009, we recorded pre-tax,
other-than-temporary impairments of $325 million, of which $161 million was
recorded through earnings ($26 million relates to equity securities), and $164
million was recorded in Accumulated Other Comprehensive Income
(AOCI).
Previously
recognized other-than-temporary impairments related to credit on securities
still held at July 1, 2009 were $499 million. During the third quarter, first
time and incremental credit impairments were $48 million and $55 million,
respectively. Previous credit impairments related to securities sold were $82
million.
During
the period April 1, 2009 through September 30, 2009, we recorded pre-tax,
other-than-temporary impairments of $624 million, of which $359 million was
recorded through earnings ($38 million relates to equity securities), and $265
million was recorded in AOCI.
Previously
recognized other-than-temporary impairments related to credit on securities
still held at April 1, 2009 were $324 million. During the period April 1, 2009
through September 30, 2009, first time and incremental credit impairments were
$74 million and $204 million, respectively. Previous credit impairments related
to securities sold were $82 million.
Supplemental
information about gross realized gains and losses on available-for-sale
investment securities follows.
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
GE
|
|
|
|
|
|
|
|
|
|
|
|
Gains
|
$
|
–
|
|
$
|
–
|
|
$
|
–
|
|
$
|
–
|
Losses,
including impairments
|
|
–
|
|
|
–
|
|
|
(172)
|
|
|
(6)
|
Net
|
|
–
|
|
|
–
|
|
|
(172)
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
GECS
|
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
55
|
|
|
26
|
|
|
114
|
|
|
180
|
Losses,
including impairments
|
|
(186)
|
|
|
(310)
|
|
|
(534)
|
|
|
(610)
|
Net
|
|
(131)
|
|
|
(284)
|
|
|
(420)
|
|
|
(430)
|
Total
|
$
|
(131)
|
|
$
|
(284)
|
|
$
|
(592)
|
|
$
|
(436)
|
Proceeds
from investment securities sales and early redemptions by the issuer totaled
$3,786 million and $934 million in the third quarters of 2009 and 2008,
respectively, and $7,418 million and $2,949 million in the first nine months of
2009 and 2008, respectively, principally from the sales and maturities of
short-term securities in our bank subsidiaries.
We
recognized pre-tax gains on trading securities of $29 million and pre-tax losses
of $(164) million in the third quarters of 2009 and 2008, respectively, and
pre-tax gains of $273 million and $223 million in the first nine months of 2009
and 2008, respectively. Investments in retained interests increased by $210
million and $10 million during the first nine months of 2009 and 2008,
respectively, reflecting changes in fair value.
Inventories
consisted of the following.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Raw
materials and work in process
|
$
|
8,365
|
|
$
|
8,710
|
Finished
goods
|
|
4,693
|
|
|
5,109
|
Unbilled
shipments
|
|
689
|
|
|
561
|
|
|
13,747
|
|
|
14,380
|
Less
revaluation to LIFO
|
|
(655)
|
|
|
(706)
|
Total
|
$
|
13,092
|
|
$
|
13,674
|
5.
GECS FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING
RECEIVABLES
GECS
financing receivables – net, consisted of the following.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Loans,
net of deferred income
|
$
|
298,432
|
|
$
|
310,203
|
Investment
in financing leases, net of deferred income
|
|
57,446
|
|
|
67,578
|
|
|
355,878
|
|
|
377,781
|
Less
allowance for losses
|
|
(7,360)
|
|
|
(5,325)
|
Financing
receivables – net(a)
|
$
|
348,518
|
|
$
|
372,456
|
|
|
|
|
|
|
(a)
|
Included
$4,406 million and $6,461 million related to consolidated, liquidating
securitization entities at September 30, 2009 and December 31, 2008,
respectively. In addition, financing receivables at September 30, 2009 and
December 31, 2008 included $2,880 million and $2,736 million,
respectively, relating to loans that had been acquired in a transfer but
have been subject to credit deterioration since origination per FASB ASC
310, Receivables.
|
Effective
January 1, 2009, loans acquired in a business acquisition are recorded at fair
value, which incorporates our estimate at the acquisition date of the credit
losses over the remaining life of the portfolio. As a result, the allowance for
loan losses is not carried over at acquisition. This may result in lower reserve
coverage ratios prospectively. Details of financing receivables – net
follow.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Commercial
Lending and Leasing (CLL)(a)
|
|
|
|
|
|
Americas
|
$
|
92,263
|
|
$
|
105,410
|
Europe
|
|
40,383
|
|
|
37,767
|
Asia
|
|
14,096
|
|
|
16,683
|
Other
|
|
776
|
|
|
786
|
|
|
147,518
|
|
|
160,646
|
Consumer(a)
|
|
|
|
|
|
Non-U.S.
residential mortgages
|
|
61,308
|
|
|
60,753
|
Non-U.S.
installment and revolving credit
|
|
25,197
|
|
|
24,441
|
U.S.
installment and revolving credit
|
|
22,324
|
|
|
27,645
|
Non-U.S.
auto
|
|
14,366
|
|
|
18,168
|
Other
|
|
13,191
|
|
|
11,541
|
|
|
136,386
|
|
|
142,548
|
|
|
|
|
|
|
Real
Estate
|
|
45,471
|
|
|
46,735
|
|
|
|
|
|
|
Energy
Financial Services
|
|
8,362
|
|
|
8,392
|
|
|
|
|
|
|
GE
Capital Aviation Services (GECAS)(b)
|
|
15,046
|
|
|
15,429
|
|
|
|
|
|
|
Other(c)
|
|
3,095
|
|
|
4,031
|
|
|
355,878
|
|
|
377,781
|
Less
allowance for losses
|
|
(7,360)
|
|
|
(5,325)
|
Total
|
$
|
348,518
|
|
$
|
372,456
|
|
|
|
|
|
|
(a)
|
During
the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
|
(b)
|
Included
loans and financing leases of $12,927 million and $13,078 million at
September 30, 2009 and December 31, 2008, respectively, related to
commercial aircraft at Aviation Financial
Services.
|
(c)
|
Consisted
of loans and financing leases related to certain consolidated, liquidating
securitization entities.
|
Individually
impaired loans are defined by GAAP as larger balance or restructured loans for
which it is probable that the lender will be unable to collect all amounts due
according to original contractual terms of the loan agreement. An analysis of
impaired loans and specific reserves follows. The vast majority of our consumer
and a portion of our CLL nonearning receivables are excluded from this
definition, as they represent smaller balance homogeneous loans that we evaluate
collectively by portfolio for impairment.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Loans
requiring allowance for losses
|
$
|
8,842
|
|
$
|
2,712
|
Loans
expected to be fully recoverable
|
|
3,218
|
|
|
871
|
Total
impaired loans
|
$
|
12,060
|
|
$
|
3,583
|
|
|
|
|
|
|
Allowance
for losses (specific reserves)
|
$
|
1,874
|
|
$
|
635
|
Average
investment during the period
|
|
7,463
|
|
|
2,064
|
Interest
income earned while impaired(a)
|
|
133
|
|
|
48
|
|
|
|
|
|
|
(a)
|
Recognized
principally on cash basis.
|
Impaired
loans increased by $8.5 billion from December 31, 2008 to September 30, 2009
primarily relating to increases at Real Estate ($5.4 billion) and CLL ($2.2
billion). Impaired loans increased by $4.0 billion from June 30, 2009 to
September 30, 2009, primarily relating to increases at Real Estate ($2.9
billion) and CLL ($0.7 billion). The increase in impaired loans and related
specific reserves in Real Estate reflects our current estimate of collateral
values of the underlying properties, and our estimate of loans which are not
past due, but for which it is probable that we will be unable to collect the
full principal balance at maturity due to a decline in the underlying value of
the collateral. Of our $6.2 billion impaired loans at Real Estate at September
30, 2009, approximately $4 billion are currently paying in accordance with the
contractual terms of the loan. Impaired loans at CLL primarily represent senior
secured lending positions.
|
Balance
|
|
Provision
|
|
|
|
|
|
|
|
Balance
|
|
January
1,
|
|
charged
to
|
|
|
|
Gross
|
|
|
|
September
30,
|
(In
millions)
|
2009
|
|
operations
|
|
Other(a)
|
|
write-offs
|
|
Recoveries
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
843
|
|
$
|
969
|
|
$
|
(34)
|
|
$
|
(746)
|
|
$
|
66
|
|
$
|
1,098
|
Europe
|
|
288
|
|
|
412
|
|
|
8
|
|
|
(225)
|
|
|
17
|
|
|
500
|
Asia
|
|
163
|
|
|
188
|
|
|
8
|
|
|
(136)
|
|
|
19
|
|
|
242
|
Other
|
|
2
|
|
|
4
|
|
|
2
|
|
|
(2)
|
|
|
–
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
383
|
|
|
805
|
|
|
81
|
|
|
(424)
|
|
|
130
|
|
|
975
|
Non-U.S.
installment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
revolving credit
|
|
1,051
|
|
|
1,347
|
|
|
41
|
|
|
(1,702)
|
|
|
376
|
|
|
1,113
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
1,700
|
|
|
2,631
|
|
|
(761)
|
|
|
(2,134)
|
|
|
132
|
|
|
1,568
|
Non-U.S.
auto
|
|
222
|
|
|
351
|
|
|
31
|
|
|
(441)
|
|
|
138
|
|
|
301
|
Other
|
|
226
|
|
|
284
|
|
|
25
|
|
|
(329)
|
|
|
73
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
301
|
|
|
903
|
|
|
13
|
|
|
(190)
|
|
|
1
|
|
|
1,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
58
|
|
|
42
|
|
|
1
|
|
|
–
|
|
|
–
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
60
|
|
|
69
|
|
|
–
|
|
|
(3)
|
|
|
–
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
28
|
|
|
16
|
|
|
–
|
|
|
(22)
|
|
|
1
|
|
|
23
|
Total
|
$
|
5,325
|
|
$
|
8,021
|
|
$
|
(585)
|
|
$
|
(6,354)
|
|
$
|
953
|
|
$
|
7,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Other
primarily included the effects of securitization activity and currency
exchange.
|
(b)
|
During
the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
|
|
Balance
|
|
Provision
|
|
|
|
|
|
|
|
Balance
|
|
January
1,
|
|
charged
to
|
|
|
|
Gross
|
|
|
|
September
30,
|
(In
millions)
|
2008
|
|
operations
|
|
Other
|
(a)
|
write-offs
|
|
Recoveries
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
471
|
|
$
|
394
|
|
$
|
157
|
|
$
|
(371)
|
|
$
|
52
|
|
$
|
703
|
Europe
|
|
232
|
|
|
145
|
|
|
(59)
|
|
|
(141)
|
|
|
23
|
|
|
200
|
Asia
|
|
226
|
|
|
78
|
|
|
(7)
|
|
|
(188)
|
|
|
5
|
|
|
114
|
Other
|
|
3
|
|
|
2
|
|
|
(1)
|
|
|
–
|
|
|
1
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
246
|
|
|
147
|
|
|
(15)
|
|
|
(135)
|
|
|
52
|
|
|
295
|
Non-U.S.
installment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
revolving credit
|
|
1,371
|
|
|
1,259
|
|
|
(57)
|
|
|
(1,968)
|
|
|
722
|
|
|
1,327
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
985
|
|
|
1,908
|
|
|
(416)
|
|
|
(1,477)
|
|
|
215
|
|
|
1,215
|
Non-U.S.
auto
|
|
324
|
|
|
260
|
|
|
(59)
|
|
|
(479)
|
|
|
225
|
|
|
271
|
Other
|
|
167
|
|
|
136
|
|
|
25
|
|
|
(182)
|
|
|
54
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
168
|
|
|
47
|
|
|
4
|
|
|
(10)
|
|
|
1
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
19
|
|
|
12
|
|
|
3
|
|
|
–
|
|
|
–
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
8
|
|
|
47
|
|
|
–
|
|
|
(1)
|
|
|
–
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
18
|
|
|
18
|
|
|
(1)
|
|
|
(15)
|
|
|
–
|
|
|
20
|
Total
|
$
|
4,238
|
|
$
|
4,453
|
|
$
|
(426)
|
|
$
|
(4,967)
|
|
$
|
1,350
|
|
$
|
4,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Other
primarily included the effects of securitization activity, currency
exchange, dispositions and
acquisitions.
|
(b)
|
During
the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
|
Property,
plant and equipment (including equipment leased to others) – net, consisted of
the following.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Original
cost
|
$
|
118,916
|
|
$
|
125,671
|
Less
accumulated depreciation and amortization
|
|
(45,923)
|
|
|
(47,141)
|
Property,
plant and equipment (including equipment leased to others) –
net
|
$
|
72,993
|
|
$
|
78,530
|
7.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
and other intangible assets – net, consisted of the following.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Goodwill
|
$
|
84,880
|
|
$
|
81,759
|
|
|
|
|
|
|
Other
intangible assets
|
|
|
|
|
|
Intangible
assets subject to amortization
|
$
|
12,640
|
|
$
|
12,623
|
Indefinite-lived
intangible assets(a)
|
|
2,370
|
|
|
2,354
|
Total
|
$
|
15,010
|
|
$
|
14,977
|
|
|
|
|
|
|
(a)
|
Indefinite-lived
intangible assets principally comprised trademarks, tradenames and U.S.
Federal Communications Commission
licenses.
|
Changes
in goodwill balances follow.
|
|
|
Acquisitions/
|
|
Dispositions,
|
|
|
|
Balance
|
|
acquisition
|
|
currency
|
|
Balance
|
|
January
1,
|
|
accounting
|
|
exchange
|
|
September
30,
|
(In
millions)
|
2009
|
|
adjustments
|
|
and
other
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
9,943
|
|
$
|
(146)
|
|
$
|
350
|
|
$
|
10,147
|
Technology
Infrastructure
|
|
26,684
|
|
|
413
|
|
|
(364)
|
|
|
26,733
|
NBC
Universal
|
|
18,973
|
|
|
20
|
|
|
4
|
|
|
18,997
|
Capital
Finance
|
|
25,365
|
|
|
2,603
|
|
|
216
|
|
|
28,184
|
Consumer
& Industrial
|
|
794
|
|
|
–
|
|
|
25
|
|
|
819
|
Total
|
$
|
81,759
|
|
$
|
2,890
|
|
$
|
231
|
|
$
|
84,880
|
Goodwill
related to new acquisitions in the first nine months of 2009 was $2,743 million
and included acquisitions of BAC Credomatic (BAC) ($1,309 million) and
Interbanca S.p.A. (Interbanca) ($1,075 million) at Capital Finance and Airfoils
Technologies International – Singapore Pte. Ltd. (ATI-Singapore) ($337 million)
at Technology Infrastructure. During the first nine months of 2009, the goodwill
balance increased by $147 million related to acquisition accounting adjustments
for prior-year acquisitions. The most significant of these adjustments was an
increase of $180 million associated with the 2008 acquisition of CitiCapital at
Capital Finance, partially offset by a decrease of $139 million associated with
the 2008 acquisition of Hydril Pressure Control by Energy Infrastructure. Also
during the first nine months of 2009, goodwill balances increased $231 million,
primarily as a result of the weaker U.S. dollar ($1,581 million), partially
offset by the deconsolidation of Penske Truck Leasing Co., L.P. (PTL) ($634
million) at Capital Finance and the disposition of GE Homeland Protection, Inc.
($423 million) at Technology Infrastructure.
On March
20, 2009, we increased our ownership in ATI-Singapore from 49% to 100% and
concurrently acquired from the same seller a controlling financial interest in
certain affiliates. We remeasured our previous equity interests to fair value,
resulting in a pre-tax gain of $254 million which is reported in other
income.
On June
25, 2009, we increased our ownership in BAC from 49.99% to 75% for a purchase
price of $623 million, in accordance with terms of a previous agreement. We
remeasured our previously held equity investment to fair value, resulting in a
pre-tax gain of $343 million, which is reported in GECS revenues from
services.
We test
goodwill for impairment annually and more frequently if circumstances warrant.
We determine fair values for each of the reporting units using an income
approach. When available and as appropriate, we use comparative market multiples
to corroborate discounted cash flow results. For purposes of the income
approach, fair value is determined based on the present value of estimated
future cash flows, discounted at an appropriate risk-adjusted rate. We use our
internal forecasts to estimate future cash flows and include an estimate of
long-term future growth rates based on our most recent views of the long-term
outlook for each business. Actual results may differ from those assumed in our
forecasts. We derive our discount rates by applying the capital asset pricing
model (i.e., to estimate the cost of equity financing) and analyzing published
rates for industries relevant to our reporting units. We use discount rates that
are commensurate with the risks and uncertainty inherent in the respective
businesses and in our internally developed forecasts. Valuations using the
market approach reflect prices and other relevant observable information
generated by market transactions involving comparable businesses.
Compared
to the market approach, the income approach more closely aligns the reporting
unit valuation to a company’s or business’ specific business model, geographic
markets and product offerings, as it is based on specific projections of the
business. Required rates of return, along with uncertainty inherent in the
forecasts of future cash flows are reflected in the selection of the discount
rate. Equally important, under this approach, reasonably likely scenarios and
associated sensitivities can be developed for alternative future states that may
not be reflected in an observable market price. A market approach allows for
comparison to actual market transactions and multiples. It can be somewhat more
limited in its application because the population of potential comparables (or
pure plays) is often limited to publicly-traded companies where the
characteristics of the comparative business and ours can be significantly
different, market data is usually not available for divisions within larger
conglomerates or non-public subsidiaries that could otherwise qualify as
comparable, and the specific circumstances surrounding a market transaction
(e.g., synergies between the parties, terms and conditions of the transaction,
etc.) may be different or irrelevant with respect to our business. It can also
be difficult under the current market conditions to identify orderly
transactions between market participants in similar financial services
businesses. We assess the valuation methodology based upon the relevance and
availability of data at the time of performing the valuation and weight the
methodologies appropriately.
Given
the significant decline in our stock price in the first quarter of 2009 and
market conditions in the financial services industry at that time, we conducted
an additional impairment analysis of the Capital Finance reporting units during
the first quarter of 2009 using data as of January 1, 2009. As a result of these
tests, no goodwill impairment was recognized.
We
performed our annual impairment test for goodwill at all of our reporting units
in the third quarter using data as of July 1, 2009. In performing the
valuations, we used cash flows which reflected management’s forecasts and
discount rates which reflect the risks associated with the current market. Based
on the results of our testing, the fair values at each of the GE Industrial
reporting units and the CLL, Consumer, Energy Financial Services and GECAS
reporting units exceeded their book values; therefore, the second step of the
impairment test (in which fair value of each of the reporting unit’s assets and
liabilities are measured) was not required to be performed and no goodwill
impairment was recognized. Due to the volatility and uncertainties in the
current commercial real estate environment, we used a range of valuations to
determine the fair value for our Real Estate reporting unit. While the Real
Estate reporting unit’s book value was within the range of its fair value, we
further substantiated our Real Estate goodwill balance by performing the second
step analysis described above. As a result of our tests for Real Estate, no
goodwill impairment was recognized. Our Real Estate reporting unit had a
goodwill balance of $1,209 million at September 30, 2009.
Estimating
the fair value of reporting units involves the use of estimates and significant
judgments that are based on a number of factors including actual operating
results. If current conditions persist longer or deteriorate further than
expected, it is reasonably possible that the judgments and estimates described
above could change in future periods.
Intangible
Assets Subject to Amortization
|
At
|
|
September
30, 2009
|
|
December
31, 2008
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
carrying
|
|
Accumulated
|
|
|
|
carrying
|
|
Accumulated
|
|
|
(In
millions)
|
amount
|
|
amortization
|
|
Net
|
|
amount
|
|
amortization
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related
|
$
|
6,591
|
|
$
|
(1,840)
|
|
$
|
4,751
|
|
$
|
6,341
|
|
$
|
(1,516)
|
|
$
|
4,825
|
Patents,
licenses and trademarks
|
|
5,194
|
|
|
(2,163)
|
|
|
3,031
|
|
|
5,315
|
|
|
(2,150)
|
|
|
3,165
|
Capitalized
software
|
|
7,294
|
|
|
(4,690)
|
|
|
2,604
|
|
|
6,872
|
|
|
(4,199)
|
|
|
2,673
|
Lease
valuations
|
|
1,734
|
|
|
(730)
|
|
|
1,004
|
|
|
1,761
|
|
|
(594)
|
|
|
1,167
|
Present
value of future profits
|
|
921
|
|
|
(463)
|
|
|
458
|
|
|
869
|
|
|
(439)
|
|
|
430
|
All
other
|
|
1,329
|
|
|
(537)
|
|
|
792
|
|
|
680
|
|
|
(317)
|
|
|
363
|
Total
|
$
|
23,063
|
|
$
|
(10,423)
|
|
$
|
12,640
|
|
$
|
21,838
|
|
$
|
(9,215)
|
|
$
|
12,623
|
Consolidated
amortization related to intangible assets subject to amortization was $616
million and $445 million for the quarters ended September 30, 2009 and 2008,
respectively. Consolidated amortization related to intangible assets subject to
amortization for the nine months ended September 30, 2009 and 2008, was $1,629
million and $1,469 million, respectively.
GECS
borrowings are summarized in the following table.
|
At
|
(In
millions)
|
September
30,
|
|
December
31,
|
|
2009
|
|
2008
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
paper
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
Unsecured(a)
|
$
|
40,135
|
|
$
|
62,768
|
Asset-backed(b)
|
|
2,884
|
|
|
3,652
|
Non-U.S.
|
|
9,871
|
|
|
9,033
|
Current
portion of long-term debt(a)(c)(d)
|
|
69,324
|
|
|
69,682
|
Bank
deposits(e)
|
|
25,738
|
|
|
29,634
|
Bank
borrowings(f)
|
|
5,041
|
|
|
10,569
|
GE
Interest Plus notes(g)
|
|
6,520
|
|
|
5,633
|
Other
|
|
1,425
|
|
|
2,562
|
Total
|
|
160,938
|
|
|
193,533
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
Senior
notes
|
|
|
|
|
|
Unsecured(a)(d)
|
|
322,280
|
|
|
298,665
|
Asset-backed(h)
|
|
4,069
|
|
|
5,002
|
Subordinated
notes(i)
|
|
2,711
|
|
|
2,866
|
Subordinated
debentures(j)
|
|
7,706
|
|
|
7,315
|
Bank
deposits(k)
|
|
10,649
|
|
|
7,220
|
Total
|
|
347,415
|
|
|
321,068
|
Total
borrowings
|
$
|
508,353
|
|
$
|
514,601
|
|
|
|
|
|
|
(a)
|
General
Electric Capital Corporation (GE Capital) had issued and outstanding
$59,110 million ($3,660 million commercial paper and $55,450 million
long-term borrowings) and $35,243 million ($21,823 million commercial
paper and $13,420 million long-term borrowings) of senior, unsecured debt
that was guaranteed by the Federal Deposit Insurance Corporation (FDIC)
under the Temporary Liquidity Guarantee Program at September 30, 2009 and
December 31, 2008, respectively. GE Capital and GE are parties to an
Eligible Entity Designation Agreement and GE Capital is subject to the
terms of a Master Agreement, each entered into with the FDIC. The terms of
these agreements include, among other things, a requirement that GE and GE
Capital reimburse the FDIC for any amounts that the FDIC pays to holders
of GE Capital debt that is guaranteed by the
FDIC.
|
(b)
|
Consists
entirely of obligations of consolidated, liquidating securitization
entities. See Note 16.
|
(c)
|
Included
$239 million and $326 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at September 30, 2009
and December 31, 2008,
respectively.
|
(d)
|
Included
$1,665 million ($74 million short-term and $1,591 million long-term) of
borrowings under European government-sponsored programs at September 30,
2009.
|
(e)
|
Included
$20,893 million and $11,793 million of deposits in non-U.S. banks at
September 30, 2009 and December 31, 2008, respectively, and included
certificates of deposits distributed by brokers of $4,845 million and
$17,841 million at September 30, 2009 and December 31, 2008,
respectively.
|
(f)
|
Term
borrowings from banks with an original term to maturity of less than 12
months.
|
(g)
|
Entirely
variable denomination floating rate demand
notes.
|
(h)
|
Included
$895 million and $2,104 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at September 30, 2009
and December 31, 2008, respectively. See Note
16.
|
(i)
|
Included
$417 million and $750 million of subordinated notes guaranteed by GE at
September 30, 2009 and December 31, 2008,
respectively.
|
(j)
|
Subordinated
debentures receive rating agency equity credit and were hedged at issuance
to the U.S. dollar equivalent of $7,725
million.
|
(k)
|
Included
certificates of deposits distributed by brokers with maturities greater
than one year of $9,898 million and $6,699 million at September 30, 2009
and December 31, 2008,
respectively.
|
9.
POSTRETIREMENT BENEFIT PLANS
We
sponsor a number of pension and retiree health and life insurance benefit plans.
Principal pension plans include the GE Pension Plan and the GE Supplementary
Pension Plan. Principal retiree benefit plans generally provide health and life
insurance benefits to employees who retire under the GE Pension Plan with 10 or
more years of service. Other pension plans include the U.S. and non-U.S. pension
plans with pension assets or obligations greater than $50 million. Smaller
pension plans and other retiree benefit plans are not material individually or
in the aggregate. The effect on operations of the pension plans
follows.
|
Principal
Pension Plans
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
$
|
(1,125)
|
|
$
|
(1,075)
|
|
$
|
(3,378)
|
|
$
|
(3,225)
|
Service
cost for benefits earned
|
|
522
|
|
|
314
|
|
|
1,211
|
|
|
934
|
Interest
cost on benefit obligation
|
|
667
|
|
|
663
|
|
|
2,001
|
|
|
1,988
|
Prior
service cost amortization
|
|
81
|
|
|
80
|
|
|
242
|
|
|
242
|
Net
actuarial loss amortization
|
|
86
|
|
|
60
|
|
|
259
|
|
|
181
|
Pension
plans cost
|
$
|
231
|
|
$
|
42
|
|
$
|
335
|
|
$
|
120
|
|
Other
Pension Plans
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
$
|
(110)
|
|
$
|
(135)
|
|
$
|
(321)
|
|
$
|
(412)
|
Service
cost for benefits earned
|
|
84
|
|
|
81
|
|
|
249
|
|
|
243
|
Interest
cost on benefit obligation
|
|
117
|
|
|
123
|
|
|
338
|
|
|
374
|
Prior
service cost amortization
|
|
3
|
|
|
3
|
|
|
8
|
|
|
9
|
Net
actuarial loss amortization
|
|
37
|
|
|
21
|
|
|
93
|
|
|
64
|
Pension
plans cost
|
$
|
131
|
|
$
|
93
|
|
$
|
367
|
|
$
|
278
|
|
Principal
Retiree Health and Life Insurance Plans
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
$
|
(32)
|
|
$
|
(32)
|
|
$
|
(96)
|
|
$
|
(98)
|
Service
cost for benefits earned
|
|
177
|
|
|
71
|
|
|
336
|
|
|
214
|
Interest
cost on benefit obligation
|
|
177
|
|
|
182
|
|
|
531
|
|
|
568
|
Prior
service cost amortization
|
|
168
|
|
|
168
|
|
|
504
|
|
|
504
|
Net
actuarial gain amortization
|
|
(27)
|
|
|
(23)
|
|
|
(81)
|
|
|
(26)
|
Retiree
benefit plans cost
|
$
|
463
|
|
$
|
366
|
|
$
|
1,194
|
|
$
|
1,162
|
10.
INCOME TAXES
During
the first quarter of 2009, following the change in our external credit ratings,
funding actions taken and review of our operations, liquidity and funding, we
determined that undistributed prior-year earnings of non-U.S. subsidiaries of
GECS, on which we had previously provided deferred U.S. taxes, would be
indefinitely reinvested outside the U.S. This change increased the amount of
prior-year earnings indefinitely reinvested outside the U.S. by approximately $2
billion to $77 billion, resulting in an income tax benefit of $700 million in
the first quarter of 2009.
The
balance of “unrecognized tax benefits,” the amount of related interest and
penalties we have provided and what we believe to be the range of reasonably
possible changes in the next 12 months, were:
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Unrecognized
tax benefits
|
$
|
7,135
|
|
$
|
6,692
|
Portion
that, if recognized, would reduce tax expense and effective tax
rate(a)
|
|
4,912
|
|
|
4,453
|
Accrued
interest on unrecognized tax benefits
|
|
1,293
|
|
|
1,204
|
Accrued
penalties on unrecognized tax benefits
|
|
102
|
|
|
96
|
Reasonably
possible reduction to the balance of unrecognized tax
benefits
|
|
|
|
|
|
in
succeeding 12 months
|
|
0-1,500
|
|
|
0-1,500
|
Portion
that, if recognized, would reduce tax expense and effective tax
rate(a)
|
|
0-1,400
|
|
|
0-1,100
|
|
|
|
|
|
|
(a)
|
Some
portion of such reduction might be reported as discontinued
operations.
|
The IRS
is currently auditing our consolidated income tax returns for 2003-2007. In
addition, certain other U.S. tax deficiency issues and refund claims for
previous years remain unresolved. It is reasonably possible that the 2003-2005
U.S. audit cycle will be completed during the next 12 months, which could result
in a decrease in our balance of unrecognized tax benefits. We believe that there
are no other jurisdictions in which the outcome of unresolved issues or claims
is likely to be material to our results of operations, financial position or
cash flows. We further believe that we have made adequate provision for all
income tax uncertainties.
GE and
GECS file a consolidated U.S. federal income tax return. The GECS provision for
current tax expense includes its effect on the consolidated return. The effect
of GECS on the consolidated liability is settled in cash as GE tax payments are
due.
A
summary of increases (decreases) in GE shareowners’ equity that did not result
directly from transactions with shareowners, net of income taxes,
follows.
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to the Company
|
$
|
2,494
|
|
$
|
4,312
|
|
$
|
8,012
|
|
$
|
13,688
|
Investment
securities – net
|
|
1,697
|
|
|
(1,086)
|
|
|
2,615
|
|
|
(2,414)
|
Currency
translation adjustments – net
|
|
1,857
|
|
|
(4,912)
|
|
|
4,342
|
|
|
(3,508)
|
Cash
flow hedges – net
|
|
71
|
|
|
(1,622)
|
|
|
1,476
|
|
|
(1,500)
|
Benefit
plans – net
|
|
180
|
|
|
210
|
|
|
659
|
|
|
924
|
Total
|
$
|
6,299
|
|
$
|
(3,098)
|
|
$
|
17,104
|
|
$
|
7,190
|
Changes
to noncontrolling interests during the third quarter of 2009 resulted from net
earnings ($5 million), dividends ($(152) million), AOCI ($14 million) and other
($20 million). Changes to the individual components of AOCI attributable to
noncontrolling interests were insignificant.
Changes
to noncontrolling interests during the first nine months of 2009 resulted from
net earnings ($102 million), dividends ($(444) million), the effects of
deconsolidating PTL ($(331) million, including $101 million of AOCI), other AOCI
($10 million) and other ($(4) million). Changes to the individual components of
AOCI attributable to noncontrolling interests were insignificant.
GECS
revenues from services are summarized in the following table.
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on loans
|
$
|
4,933
|
|
$
|
7,198
|
|
$
|
15,113
|
|
$
|
20,426
|
Equipment
leased to others
|
|
2,902
|
|
|
3,967
|
|
|
9,314
|
|
|
11,686
|
Fees
|
|
1,160
|
|
|
1,989
|
|
|
3,419
|
|
|
4,798
|
Financing
leases
|
|
795
|
|
|
1,107
|
|
|
2,533
|
|
|
3,456
|
Real
estate investments
|
|
410
|
|
|
803
|
|
|
1,128
|
|
|
3,102
|
Premiums
earned by insurance activities
|
|
515
|
|
|
554
|
|
|
1,525
|
|
|
1,664
|
Associated
companies
|
|
277
|
|
|
560
|
|
|
751
|
|
|
1,676
|
Investment
income(a)
|
|
755
|
|
|
531
|
|
|
2,413
|
|
|
2,388
|
Net
securitization gains
|
|
449
|
|
|
317
|
|
|
1,169
|
|
|
1,022
|
Other
items(b)(c)
|
|
337
|
|
|
826
|
|
|
2,604
|
|
|
3,809
|
Total
|
$
|
12,533
|
|
$
|
17,852
|
|
$
|
39,969
|
|
$
|
54,027
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included
net other-than-temporary impairments on investment securities of $161
million and $309 million in the third quarters of 2009 and 2008,
respectively, and $484 million and $599 million in the first nine months
of 2009 and 2008, respectively. See Note
3.
|
(b)
|
Included
a gain on the sale of a limited partnership interest in PTL and a related
gain on the remeasurement of the retained investment to fair value
totaling $296 million in the first quarter of 2009. See Note
16.
|
(c)
|
Included
a gain of $343 million on the remeasurement to fair value of our equity
method investment in BAC, following our acquisition of a controlling
interest in the second quarter of 2009. See Note
7.
|
13.
EARNINGS PER SHARE INFORMATION
GE’s
authorized common stock consists of 13,200,000,000 shares having a par value of
$0.06 each. Information related to the calculation of earnings per share
follows.
|
Three
months ended September 30
|
|
2009(a)
|
|
2008
|
(In
millions; per-share amounts in dollars)
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to the Company:
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations for
|
|
|
|
|
|
|
|
|
|
|
|
per-share
calculation
|
$
|
2,438
|
|
$
|
2,438
|
|
$
|
4,478
|
|
$
|
4,477
|
Preferred
stock dividends declared
|
|
(75)
|
|
|
(75)
|
|
|
–
|
|
|
–
|
Earnings
from continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
common
shareowners for per-share calculation
|
$
|
2,363
|
|
$
|
2,363
|
|
$
|
4,478
|
|
$
|
4,477
|
Earnings
(loss) from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
for
per-share calculation
|
|
40
|
|
|
40
|
|
|
(165)
|
|
|
(165)
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
for per-share calculation
|
|
2,403
|
|
|
2,402
|
|
|
4,313
|
|
|
4,312
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
equivalent shares
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of GE common stock outstanding
|
|
10,638
|
|
|
10,638
|
|
|
9,953
|
|
|
9,953
|
Employee
compensation-related shares,
|
|
|
|
|
|
|
|
|
|
|
|
including
stock options
|
|
–
|
|
|
–
|
|
|
17
|
|
|
–
|
Total
average equivalent shares
|
|
10,638
|
|
|
10,638
|
|
|
9,970
|
|
|
9,953
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
0.22
|
|
$
|
0.22
|
|
$
|
0.45
|
|
$
|
0.45
|
Earnings
(loss) from discontinued operations
|
|
–
|
|
|
–
|
|
|
(0.02)
|
|
|
(0.02)
|
Net
earnings
|
|
0.23
|
|
|
0.23
|
|
|
0.43
|
|
|
0.43
|
|
Nine
months ended September 30
|
|
2009(a)
|
|
2008
|
(In
millions; per-share amounts in dollars)
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to the Company:
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations for
|
|
|
|
|
|
|
|
|
|
|
|
per-share
calculation
|
$
|
8,157
|
|
$
|
8,156
|
|
$
|
14,223
|
|
$
|
14,222
|
Preferred
stock dividends declared
|
|
(225)
|
|
|
(225)
|
|
|
–
|
|
|
–
|
Earnings
from continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
common
shareowners for per-share calculation
|
$
|
7,932
|
|
$
|
7,931
|
|
$
|
14,223
|
|
$
|
14,222
|
Loss
from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
for
per-share calculation
|
|
(175)
|
|
|
(175)
|
|
|
(534)
|
|
|
(534)
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
for per-share calculation
|
|
7,757
|
|
|
7,756
|
|
|
13,689
|
|
|
13,688
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
equivalent shares
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of GE common stock outstanding
|
|
10,601
|
|
|
10,601
|
|
|
9,965
|
|
|
9,965
|
Employee
compensation-related shares,
|
|
|
|
|
|
|
|
|
|
|
|
including
stock options
|
|
–
|
|
|
–
|
|
|
24
|
|
|
–
|
Total
average equivalent shares
|
|
10,601
|
|
|
10,601
|
|
|
9,989
|
|
|
9,965
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
0.75
|
|
$
|
0.75
|
|
$
|
1.42
|
|
$
|
1.43
|
Loss
from discontinued operations
|
|
(0.02)
|
|
|
(0.02)
|
|
|
(0.05)
|
|
|
(0.05)
|
Net
earnings
|
|
0.73
|
|
|
0.73
|
|
|
1.37
|
|
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
January 1, 2009, our unvested restricted stock unit awards that contain
non-forfeitable rights to dividends or dividend equivalents are considered
participating securities and, therefore, are included in the computation of
earnings per share pursuant to the two-class method. Application of this
treatment had an insignificant effect.
|
(a)
|
At
September 30, 2009, there were no potential shares included in our diluted
EPS calculation because the effect would have been anti-dilutive. Further
information about potential common shares is provided in Notes 23 and 24
of our 2008 Form 10-K.
|
Earnings-per-share
amounts are computed independently for earnings from continuing operations,
earnings (loss) from discontinued operations and net earnings. As a result, the
sum of per-share amounts from continuing operations and discontinued operations
may not equal the total per-share amounts for net earnings. Additionally,
earnings-per-share amounts are computed independently for each quarter. As a
result, the sum of the per-share amounts for each quarter may not equal the
year-to-date amounts.
14.
FAIR VALUE MEASUREMENTS
We
adopted FASB ASC 820 in two steps; effective January 1, 2008, we adopted it for
all financial instruments and non-financial instruments accounted for at fair
value on a recurring basis and effective January 1, 2009, for all non-financial
instruments accounted for at fair value on a non-recurring basis. This guidance
establishes a new framework for measuring fair value and expands related
disclosures. Broadly, the framework requires fair value to be determined based
on the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants. It
also establishes a three-level valuation hierarchy based upon observable and
non-observable inputs.
For
financial assets and liabilities, fair value is the price we would receive to
sell an asset or pay to transfer a liability in an orderly transaction with a
market participant at the measurement date. In the absence of active markets for
the identical assets or liabilities, such measurements involve developing
assumptions based on market observable data and, in the absence of such data,
internal information that is consistent with what market participants would use
in a hypothetical transaction that occurs at the measurement date.
Observable
inputs reflect market data obtained from independent sources, while unobservable
inputs reflect our market assumptions. Preference is given to observable inputs.
These two types of inputs create the following fair value
hierarchy:
Level
1 –
|
Quoted
prices for identical instruments in active
markets.
|
Level
2 –
|
Quoted
prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant
value drivers are observable.
|
Level
3 –
|
Significant
inputs to the valuation model are
unobservable.
|
We
maintain policies and procedures to value instruments using the best and most
relevant data available. In addition, we have risk management teams that review
valuation, including independent price validation for certain instruments.
Further, in other instances, we retain independent pricing vendors to assist in
valuing certain instruments.
The
following section describes the valuation methodologies we use to measure
different financial instruments at fair value on a recurring basis. There has
been no change to the valuation methodologies during 2009.
Investments
in Debt and Equity Securities
When
available, we use quoted market prices to determine the fair value of investment
securities, and they are included in Level 1. Level 1 securities primarily
include publicly-traded equity securities.
When
quoted market prices are unobservable, we obtain pricing information from an
independent pricing vendor. The pricing vendor uses various pricing models for
each asset class that are consistent with what other market participants would
use. The inputs and assumptions to the model of the pricing vendor are derived
from market observable sources including: benchmark yields, reported trades,
broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and
other market-related data. Since many fixed income securities do not trade on a
daily basis, the methodology of the pricing vendor uses available information as
applicable such as benchmark curves, benchmarking of like securities, sector
groupings, and matrix pricing. The pricing vendor considers all available market
observable inputs in determining the evaluation for a security. Thus, certain
securities may not be priced using quoted prices, but rather determined from
market observable information. These investments are included in Level 2 and
primarily comprise our portfolio of corporate fixed income, and government,
mortgage and asset-backed securities. In infrequent circumstances, our pricing
vendors may provide us with valuations that are based on significant
unobservable inputs, and in those circumstances we classify the investment
securities in Level 3.
Annually,
we conduct reviews of our primary pricing vendor, with the assistance of an
accounting firm, to validate that the inputs used in that vendor’s pricing
process are deemed to be market observable as defined in the standard. While we
were not provided access to proprietary models of the vendor, our reviews have
included on-site walk-throughs of the pricing process, methodologies and control
procedures for each asset class and level for which prices are provided. Our
review also included an examination of the underlying inputs and assumptions for
a sample of individual securities across asset classes, credit rating levels and
various durations, a process we continue to perform for each reporting period.
In addition, the pricing vendor has an established challenge process in place
for all security valuations, which facilitates identification and resolution of
potentially erroneous prices. We believe that the prices received from our
pricing vendor are representative of prices that would be received to sell the
assets at the measurement date (exit prices) and are classified appropriately in
the hierarchy.
We use
non-binding broker quotes as our primary basis for valuation when there is
limited, or no, relevant market activity for a specific instrument or for other
instruments that share similar characteristics. We have not adjusted the prices
we have obtained. Investment securities priced using non-binding broker quotes
are included in Level 3. As is the case with our primary pricing vendor,
third-party brokers do not provide access to their proprietary valuation models,
inputs and assumptions. Accordingly, our risk management personnel conduct
internal reviews of pricing for all such investment securities quarterly to
ensure reasonableness of valuations used in our financial statements. These
reviews are designed to identify prices that appear stale, those that have
changed significantly from prior valuations, and other anomalies that may
indicate that a price may not be accurate. Based on the information available,
we believe that the fair values provided by the brokers are representative of
prices that would be received to sell the assets at the measurement date (exit
prices). Level 3 investment securities valued using non-binding broker quotes
totaled $1,059 million and $2,074 million at September 30, 2009 and December 31,
2008, respectively, and were classified as available-for-sale
securities.
Retained
interests in securitizations are valued using a discounted cash flow model that
considers the underlying structure of the securitization and estimated net
credit exposure, prepayment assumptions, discount rates and expected
life.
Private
equity investments held in investment company affiliates are initially valued at
cost. Valuations are reviewed at the end of each quarter utilizing available
market data to determine whether or not any fair value adjustments are
necessary. Such market data include any comparable public company trading
multiples. Unobservable inputs include company-specific fundamentals and other
third-party transactions in that security. These investments are generally
included in Level 3.
Derivatives
We use
closing prices for derivatives included in Level 1, which are traded either on
exchanges or liquid over-the-counter markets.
The
majority of our derivatives portfolio is valued using internal models. The
models maximize the use of market observable inputs including interest rate
curves and both forward and spot prices for currencies and commodities.
Derivative assets and liabilities included in Level 2 primarily represent
interest rate swaps, cross-currency swaps and foreign currency and commodity
forward and option contracts.
Derivative
assets and liabilities included in Level 3 primarily represent interest rate
products that contain embedded optionality or prepayment features.
The
following tables present our assets and liabilities measured at fair value on a
recurring basis. Included in the tables are investment securities of $25,995
million and $21,967 million at September 30, 2009 and December 31, 2008,
respectively, primarily supporting obligations to annuitants and policyholders
in our run-off insurance operations, and $7,204 million and $8,190 million at
September 30, 2009 and December 31, 2008, respectively, supporting obligations
to holders of guaranteed investment contracts. Such securities are mainly
investment grade.
|
|
|
|
|
|
|
Netting
|
|
|
(In
millions)
|
Level
1
|
Level
2
|
Level
3
|
adjustment
|
(a)
|
Net
balance
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
75
|
|
$
|
20,192
|
|
$
|
3,145
|
|
$
|
–
|
|
$
|
23,412
|
State
and municipal
|
|
185
|
|
|
1,702
|
|
|
247
|
|
|
–
|
|
|
2,134
|
Residential
mortgage-backed
|
|
–
|
|
|
3,380
|
|
|
57
|
|
|
–
|
|
|
3,437
|
Commercial
mortgage-backed
|
|
–
|
|
|
2,484
|
|
|
59
|
|
|
–
|
|
|
2,543
|
Asset-backed
|
|
–
|
|
|
830
|
|
|
1,902
|
|
|
–
|
|
|
2,732
|
Corporate
– non-U.S.
|
|
238
|
|
|
725
|
|
|
750
|
|
|
–
|
|
|
1,713
|
Government
– non-U.S.
|
|
1,156
|
|
|
2,048
|
|
|
166
|
|
|
–
|
|
|
3,370
|
U.S.
government and federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
|
agency
|
|
8
|
|
|
3,259
|
|
|
291
|
|
|
–
|
|
|
3,558
|
Retained
interests
|
|
–
|
|
|
–
|
|
|
8,418
|
|
|
–
|
|
|
8,418
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
|
Available-for-sale
|
|
603
|
|
|
161
|
|
|
21
|
|
|
–
|
|
|
785
|
Trading
|
|
659
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
659
|
Derivatives(b)
|
|
–
|
|
|
12,124
|
|
|
856
|
|
|
(4,758)
|
|
|
8,222
|
Other(c)
|
|
2
|
|
|
–
|
|
|
971
|
|
|
–
|
|
|
973
|
Total
|
$
|
2,926
|
|
$
|
46,905
|
|
$
|
16,883
|
|
$
|
(4,758)
|
|
$
|
61,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
$
|
–
|
|
$
|
8,891
|
|
$
|
283
|
|
$
|
(4,784)
|
|
$
|
4,390
|
Other(d)
|
|
–
|
|
|
804
|
|
|
–
|
|
|
–
|
|
|
804
|
Total
|
$
|
–
|
|
$
|
9,695
|
|
$
|
283
|
|
$
|
(4,784)
|
|
$
|
5,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
–
|
|
$
|
17,191
|
|
$
|
3,209
|
|
$
|
–
|
|
$
|
20,400
|
State
and municipal
|
|
–
|
|
|
1,234
|
|
|
247
|
|
|
–
|
|
|
1,481
|
Residential
mortgage-backed
|
|
30
|
|
|
4,141
|
|
|
173
|
|
|
–
|
|
|
4,344
|
Commercial
mortgage-backed
|
|
–
|
|
|
2,070
|
|
|
66
|
|
|
–
|
|
|
2,136
|
Asset-backed
|
|
–
|
|
|
880
|
|
|
1,605
|
|
|
–
|
|
|
2,485
|
Corporate
– non-U.S.
|
|
69
|
|
|
562
|
|
|
658
|
|
|
–
|
|
|
1,289
|
Government
– non-U.S.
|
|
496
|
|
|
422
|
|
|
424
|
|
|
–
|
|
|
1,342
|
U.S.
government and federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency
|
|
5
|
|
|
515
|
|
|
184
|
|
|
–
|
|
|
704
|
Retained
interests
|
|
–
|
|
|
–
|
|
|
6,356
|
|
|
–
|
|
|
6,356
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
475
|
|
|
12
|
|
|
34
|
|
|
–
|
|
|
521
|
Trading
|
|
83
|
|
|
305
|
|
|
–
|
|
|
–
|
|
|
388
|
Derivatives(b)
|
|
–
|
|
|
18,911
|
|
|
1,142
|
|
|
(7,411)
|
|
|
12,642
|
Other(c)
|
|
1
|
|
|
288
|
|
|
1,105
|
|
|
–
|
|
|
1,394
|
Total
|
$
|
1,159
|
|
$
|
46,531
|
|
$
|
15,203
|
|
$
|
(7,411)
|
|
$
|
55,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
$
|
2
|
|
$
|
12,643
|
|
$
|
166
|
|
$
|
(7,575)
|
|
$
|
5,236
|
Other(d)
|
|
–
|
|
|
1,031
|
|
|
–
|
|
|
–
|
|
|
1,031
|
Total
|
$
|
2
|
|
$
|
13,674
|
|
$
|
166
|
|
$
|
(7,575)
|
|
$
|
6,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The
netting of derivative receivables and payables is permitted when a legally
enforceable master netting agreement exists. Included fair value
adjustments related to our own and counterparty credit
risk.
|
(b)
|
The
fair value of derivatives included an adjustment for non-performance risk.
At September 30, 2009 and December 31, 2008, the cumulative adjustment was
a gain of $26 million and $177 million,
respectively.
|
(c)
|
Included
private equity investments and loans designated under the fair value
option.
|
(d)
|
Primarily
represented the liability associated with certain of our deferred
incentive compensation plans.
|
The
following tables present the changes in Level 3 instruments measured on a
recurring basis for the three months ended September 30, 2009 and 2008, and the
nine months ended September 30, 2009 and 2008. The majority of our Level 3
balances consist of investment securities classified as available-for-sale with
changes in fair value recorded in shareowners’ equity.
Changes
in Level 3 Instruments for the Three Months Ended September 30,
2009
(In
millions)
|
|
|
|
|
Net
realized/
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
|
|
|
|
unrealized
|
|
|
|
|
|
|
|
|
in
unrealized
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
Net
realized/
|
|
included
in
|
|
|
|
|
|
|
|
|
|
relating
to
|
|
|
|
|
unrealized
|
|
accumulated
|
|
Purchases,
|
|
Transfers
|
|
|
|
|
instruments
|
|
|
|
|
gains(losses)
|
|
other
|
|
issuances
|
|
in
and/or
|
|
|
|
|
still
held at
|
|
|
July
1,
|
|
included
in
|
|
comprehensive
|
|
and
|
|
out
of
|
|
September
30,
|
|
|
September
30,
|
|
|
2009
|
|
earnings
|
(a)
|
income
|
|
settlements
|
|
Level
3
|
(b)
|
2009
|
|
|
2009
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
2,925
|
|
$
|
(33)
|
|
$
|
258
|
|
$
|
(46)
|
|
$
|
41
|
|
$
|
3,145
|
|
|
$
|
1
|
|
State
and municipal
|
|
157
|
|
|
–
|
|
|
6
|
|
|
73
|
|
|
11
|
|
|
247
|
|
|
|
–
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed
|
|
62
|
|
|
(1)
|
|
|
5
|
|
|
–
|
|
|
(9)
|
|
|
57
|
|
|
|
–
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed
|
|
50
|
|
|
–
|
|
|
4
|
|
|
–
|
|
|
5
|
|
|
59
|
|
|
|
–
|
|
Asset-backed
|
|
1,814
|
|
|
(10)
|
|
|
17
|
|
|
(30)
|
|
|
111
|
|
|
1,902
|
|
|
|
–
|
|
Corporate
– non-U.S.
|
|
639
|
|
|
15
|
|
|
72
|
|
|
(4)
|
|
|
28
|
|
|
750
|
|
|
|
–
|
|
Government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
non-U.S.
|
|
143
|
|
|
–
|
|
|
10
|
|
|
14
|
|
|
(1)
|
|
|
166
|
|
|
|
–
|
|
U.S.
government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
federal
agency
|
|
266
|
|
|
22
|
|
|
4
|
|
|
(1)
|
|
|
–
|
|
|
291
|
|
|
|
–
|
|
Retained
interests
|
|
7,525
|
|
|
275
|
|
|
74
|
|
|
544
|
|
|
–
|
|
|
8,418
|
|
|
|
75
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
18
|
|
|
–
|
|
|
2
|
|
|
–
|
|
|
1
|
|
|
21
|
|
|
|
1
|
|
Trading
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
|
–
|
|
Derivatives(d)(e)
|
|
789
|
|
|
47
|
|
|
27
|
|
|
(68)
|
|
|
(184)
|
|
|
611
|
|
|
|
62
|
|
Other
|
|
1,031
|
|
|
(90)
|
|
|
21
|
|
|
9
|
|
|
–
|
|
|
971
|
|
|
|
(90)
|
|
Total
|
$
|
15,419
|
|
$
|
225
|
|
$
|
500
|
|
$
|
491
|
|
$
|
3
|
|
$
|
16,638
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Earnings
effects are primarily included in the “GECS revenues from services” and
“Interest and other financial charges” captions in the Condensed Statement
of Earnings.
|
(b)
|
Transfers
in and out of Level 3 are considered to occur at the beginning of the
period. Transfers out of Level 3 were a result of increased use of quotes
from independent pricing vendors based on recent trading
activity.
|
(c)
|
Represented
the amount of unrealized gains or losses for the period included in
earnings.
|
(d)
|
Earnings
from derivatives were more than offset by $83 million in losses from
related derivatives included in Level
2.
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $38 million not reflected in the fair value hierarchy
table.
|
Changes
in Level 3 Instruments for the Three Months Ended September 30,
2008
(In
millions)
|
|
|
|
|
Net
realized/
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
|
|
|
|
unrealized
|
|
|
|
|
|
|
|
|
in
unrealized
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
Net
realized/
|
|
included
in
|
|
|
|
|
|
|
|
|
relating
to
|
|
|
|
|
unrealized
|
|
accumulated
|
|
Purchases,
|
|
Transfers
|
|
|
|
|
instruments
|
|
|
|
|
gains(losses)
|
|
other
|
|
issuances
|
|
in
and/or
|
|
|
|
|
still
held at
|
|
|
July
1,
|
|
included
in
|
|
comprehensive
|
|
and
|
|
out
of
|
|
September
30,
|
|
|
September
30,
|
|
|
2008
|
|
earnings
|
(a)
|
income
|
|
settlements
|
|
Level
3
|
(b)
|
2008
|
|
|
2008
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
$
|
13,830
|
|
$
|
278
|
|
$
|
(321)
|
|
$
|
(484)
|
|
$
|
(291)
|
|
$
|
13,012
|
|
|
$
|
128
|
|
Derivatives(d)(e)
|
|
491
|
|
|
414
|
|
|
18
|
|
|
(61)
|
|
|
9
|
|
|
871
|
|
|
|
359
|
|
Other
|
|
1,349
|
|
|
(84)
|
|
|
(39)
|
|
|
(5)
|
|
|
(1)
|
|
|
1,220
|
|
|
|
(88)
|
|
Total
|
$
|
15,670
|
|
$
|
608
|
|
$
|
(342)
|
|
$
|
(550)
|
|
$
|
(283)
|
|
$
|
15,103
|
|
|
$
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Earnings
effects are primarily included in the “GECS revenues from services” and
“Interest and other financial charges” captions in the Condensed Statement
of Earnings.
|
(b)
|
Transfers
in and out of Level 3 are considered to occur at the beginning of the
period.
|
(c)
|
Represented
the amount of unrealized gains or losses for the period included in
earnings.
|
(d)
|
Earnings
from derivatives were more than offset by $190 million in losses from
related derivatives included in Level 2 and $253 million in losses from
qualifying fair value hedges.
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $23 million not reflected in the fair value hierarchy
table.
|
Changes
in Level 3 Instruments for the Nine Months Ended September 30, 2009
(In
millions)
|
|
|
|
|
Net
realized/
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
|
|
|
|
unrealized
|
|
|
|
|
|
|
|
|
in
unrealized
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
Net
realized/
|
|
included
in
|
|
|
|
|
|
|
|
|
relating
to
|
|
|
|
|
unrealized
|
|
accumulated
|
|
Purchases,
|
|
Transfers
|
|
|
|
|
instruments
|
|
|
|
|
gains(losses)
|
|
other
|
|
issuances
|
|
in
and/or
|
|
|
|
|
still
held at
|
|
|
January
1,
|
|
included
in
|
|
comprehensive
|
|
and
|
|
out
of
|
|
September
30,
|
|
|
September
30,
|
|
|
2009
|
|
earnings
|
(a)
|
income
|
|
settlements
|
|
Level
3
|
(b)
|
2009
|
|
|
2009
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
3,220
|
|
$
|
(151)
|
|
$
|
320
|
|
$
|
(106)
|
|
$
|
(138)
|
|
$
|
3,145
|
|
|
$
|
4
|
|
State
and municipal
|
|
247
|
|
|
–
|
|
|
(101)
|
|
|
65
|
|
|
36
|
|
|
247
|
|
|
|
–
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed
|
|
173
|
|
|
(1)
|
|
|
(10)
|
|
|
(20)
|
|
|
(85)
|
|
|
57
|
|
|
|
–
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgage-backed
|
|
66
|
|
|
–
|
|
|
(4)
|
|
|
–
|
|
|
(3)
|
|
|
59
|
|
|
|
–
|
|
Asset-backed
|
|
1,605
|
|
|
(1)
|
|
|
244
|
|
|
84
|
|
|
(30)
|
|
|
1,902
|
|
|
|
–
|
|
Corporate
– non-U.S.
|
|
659
|
|
|
2
|
|
|
87
|
|
|
31
|
|
|
(29)
|
|
|
750
|
|
|
|
–
|
|
Government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
non-U.S.
|
|
424
|
|
|
–
|
|
|
6
|
|
|
17
|
|
|
(281)
|
|
|
166
|
|
|
|
–
|
|
U.S.
government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
federal
agency
|
|
183
|
|
|
22
|
|
|
88
|
|
|
(2)
|
|
|
–
|
|
|
291
|
|
|
|
–
|
|
Retained
interests
|
|
6,356
|
|
|
924
|
|
|
244
|
|
|
894
|
|
|
–
|
|
|
8,418
|
|
|
|
166
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
23
|
|
|
(1)
|
|
|
5
|
|
|
(2)
|
|
|
(4)
|
|
|
21
|
|
|
|
2
|
|
Trading
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
|
–
|
|
Derivatives(d)(e)
|
|
1,003
|
|
|
56
|
|
|
(38)
|
|
|
(241)
|
|
|
(169)
|
|
|
611
|
|
|
|
(117)
|
|
Other
|
|
1,105
|
|
|
(227)
|
|
|
32
|
|
|
54
|
|
|
7
|
|
|
971
|
|
|
|
(298)
|
|
Total
|
$
|
15,064
|
|
$
|
623
|
|
$
|
873
|
|
$
|
774
|
|
$
|
(696)
|
|
$
|
16,638
|
|
|
$
|
(243)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Earnings
effects are primarily included in the “GECS revenues from services” and
“Interest and other financial charges” captions in the Condensed Statement
of Earnings.
|
(b)
|
Transfers
in and out of Level 3 are considered to occur at the beginning of the
period. Transfers out of Level 3 were a result of increased use of quotes
from independent pricing vendors based on recent trading
activity.
|
(c)
|
Represented
the amount of unrealized gains or losses for the period included in
earnings.
|
(d)
|
Earnings
from derivatives were partially offset by $40 million in losses from
related derivatives included in Level 2
..
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $38 million not reflected in the fair value hierarchy
table.
|
Changes
in Level 3 Instruments for the Nine Months Ended September 30, 2008
(In
millions)
|
|
|
|
|
Net
realized/
|
|
|
|
|
|
|
|
|
Net
change
|
|
|
|
|
|
|
unrealized
|
|
|
|
|
|
|
|
|
in
unrealized
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
|
|
|
|
gains
(losses)
|
|
|
|
|
Net
realized/
|
|
included
in
|
|
|
|
|
|
|
|
|
relating
to
|
|
|
|
|
unrealized
|
|
accumulated
|
|
Purchases,
|
|
Transfers
|
|
|
|
|
instruments
|
|
|
|
|
gains(losses)
|
|
other
|
|
issuances
|
|
in
and/or
|
|
|
|
|
still
held at
|
|
|
January
1,
|
|
included
in
|
|
comprehensive
|
|
and
|
|
out
of
|
|
September
30,
|
|
|
September
30,
|
|
|
2008
|
|
earnings
|
(a)
|
income
|
|
settlements
|
|
Level
3
|
(b)
|
2008
|
|
|
2008
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
$
|
12,447
|
|
$
|
619
|
|
$
|
(503)
|
|
$
|
60
|
|
$
|
389
|
|
$
|
13,012
|
|
|
$
|
101
|
|
Derivatives(d)(e)
|
|
265
|
|
|
719
|
|
|
40
|
|
|
(162)
|
|
|
9
|
|
|
871
|
|
|
|
554
|
|
Other
|
|
1,330
|
|
|
(110)
|
|
|
(9)
|
|
|
(41)
|
|
|
50
|
|
|
1,220
|
|
|
|
(54)
|
|
Total
|
$
|
14,042
|
|
$
|
1,228
|
|
$
|
(472)
|
|
$
|
(143)
|
|
$
|
448
|
|
$
|
15,103
|
|
|
$
|
601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Earnings
effects are primarily included in the “GECS revenues from services” and
“Interest and other financial charges” captions in the Condensed Statement
of Earnings.
|
(b)
|
Transfers
in and out of Level 3 are considered to occur at the beginning of the
period.
|
(c)
|
Represented
the amount of unrealized gains or losses for the period included in
earnings.
|
(d)
|
Earnings
from derivatives were partially offset by $275 million in losses from
related derivatives included in Level 2 and $309 million in losses from
qualifying fair value hedges.
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $23 million not reflected in the fair value hierarchy
table.
|
Non-Recurring
Fair Value Measurements
Certain
assets are measured at fair value on a non-recurring basis. These assets are not
measured at fair value on an ongoing basis but are subject to fair value
adjustments only in certain circumstances. These include certain loans that are
written down to fair value when they are held for sale or when they are written
down to the fair value of their underlying collateral when deemed impaired, cost
and equity method investments that are written down to fair value when their
declines are determined to be other-than-temporary, long-lived assets that are
written down to fair value when they are held for sale or determined to be
impaired and the remeasurement of retained investments in formerly consolidated
subsidiaries.
Non-recurring
fair value amounts (as measured at the time of the adjustment) for assets still
held at September 30, 2009 and December 31, 2008, totaled $744 million and $48
million, identified as Level 2, and $16,233 million and $3,145 million,
identified as Level 3, respectively. Level 3 amounts at September 30, 2009
primarily included our retained investment in PTL ($5,991 million), financing
receivables and loans held for sale ($5,404 million), long-lived assets ($3,215
million), primarily real estate held for investment and equipment leased to
others, and cost and equity method investments ($1,313 million).
The
following table represents the fair value adjustments to assets measured at fair
value on a non-recurring basis and still held at September 30, 2009 and
September 30, 2008.
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
receivables and loans held for sale
|
$
|
(658)
|
|
$
|
(121)
|
|
$
|
(1,339)
|
|
$
|
(383)
|
Cost
and equity method investments
|
|
(354)
|
|
|
(199)
|
|
|
(822)
|
|
|
(275)
|
Long-lived
assets(a)
|
|
(417)
|
|
|
(135)
|
|
|
(692)
|
|
|
(210)
|
Retained
investments in formerly consolidated
|
|
|
|
|
|
|
|
|
|
|
|
subsidiaries(a)
|
|
–
|
|
|
–
|
|
|
237
|
|
|
–
|
Total
|
$
|
(1,429)
|
|
$
|
(455)
|
|
$
|
(2,616)
|
|
$
|
(868)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
FASB
ASC 820 was adopted for non-financial assets valued on a non-recurring
basis as of January 1, 2009.
|
The
following describes the valuation methodologies we use to measure non-financial
instruments accounted for at fair value on a non-recurring basis. There has been
no change to the valuation methodologies during 2009.
Loans
When
available, we use observable market data, including pricing on recent closed
market transactions, to value loans which are included in Level 2. When this
data is unobservable, we use valuation methodologies using current market
interest rate data adjusted for inherent credit risk, and such loans are
included in Level 3. When appropriate, loans are valued using collateral values
as a practical expedient.
Long-lived
Assets
Long-lived
assets, including aircraft and real estate, may be measured at fair value if
such assets are held for sale or when there is a determination that the asset is
impaired. The determination of fair value is based on the best information
available, including internal cash flow estimates discounted at an appropriate
interest rate, quoted market prices when available, market prices for similar
assets and independent appraisals, as appropriate. For real estate, cash flow
estimates are based on current market estimates that reflect current and
projected lease profiles and available industry information about expected
trends in rental, occupancy and capitalization rates.
Investments
in Subsidiaries and Formerly Consolidated Subsidiaries
Upon a
change in control that results in deconsolidation of a subsidiary, a fair value
measurement may be required if we sell a controlling interest and retain a
noncontrolling stake in the entity. Such investments are valued using a
discounted cash flow model, comparative market multiples or a combination of
both approaches as appropriate. In applying these methodologies, we rely on a
number of factors, including actual operating results, future business plans,
economic projections and market data.
The
following table provides information about the assets and liabilities not
carried at fair value in our Statement of Financial Position. Consistent with
FASB ASC 825, the table excludes financing leases and non-financial assets and
liabilities. Apart from certain of our borrowings and certain marketable
securities, few of the instruments identified below are actively traded and
their fair values must often be determined using financial models. Realization
of the fair value of these instruments depends upon market forces beyond our
control, including marketplace liquidity. For a description on how we estimate
fair value, see Note 29 to the consolidated financial statements in our 2008
Form 10-K.
|
At
|
|
September
30, 2009
|
|
December
31, 2008
|
|
|
|
Assets
(liabilities)
|
|
|
|
Assets
(liabilities)
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
Notional
|
|
amount
|
|
Estimated
|
|
Notional
|
|
amount
|
|
Estimated
|
(In
millions)
|
amount
|
|
(net)
|
|
fair
value
|
|
amount
|
|
(net)
|
|
fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
and notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
receivable
|
$
|
(a)
|
|
$
|
443
|
|
$
|
434
|
|
$
|
(a)
|
|
$
|
554
|
|
$
|
511
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
(a)
|
|
|
(12,247)
|
|
|
(12,938)
|
|
|
(a)
|
|
|
(12,202)
|
|
|
(12,267)
|
GECS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
(a)
|
|
|
291,774
|
|
|
273,017
|
|
|
(a)
|
|
|
305,376
|
|
|
292,797
|
Other
commercial mortgages
|
|
(a)
|
|
|
1,172
|
|
|
1,194
|
|
|
(a)
|
|
|
1,501
|
|
|
1,427
|
Loans
held for sale
|
|
(a)
|
|
|
1,864
|
|
|
1,898
|
|
|
(a)
|
|
|
3,640
|
|
|
3,670
|
Other
financial instruments (b)
|
|
(a)
|
|
|
2,229
|
|
|
2,351
|
|
|
(a)
|
|
|
2,637
|
|
|
2,810
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings(c)(d)
|
|
(a)
|
|
|
(508,353)
|
|
|
(509,465)
|
|
|
(a)
|
|
|
(514,601)
|
|
|
(495,541)
|
Investment
contract benefits
|
|
(a)
|
|
|
(4,003)
|
|
|
(4,556)
|
|
|
(a)
|
|
|
(4,212)
|
|
|
(4,536)
|
Guaranteed
investment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
contracts
|
|
(a)
|
|
|
(9,241)
|
|
|
(9,156)
|
|
|
(a)
|
|
|
(10,828)
|
|
|
(10,677)
|
Insurance
– credit life(e)
|
|
1,481
|
|
|
(74)
|
|
|
(49)
|
|
|
1,165
|
|
|
(44)
|
|
|
(31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These
financial instruments do not have notional
amounts.
|
(b)
|
Principally
cost method investments.
|
(d)
|
Fair
values exclude interest rate and currency derivatives designated as hedges
of borrowings. Had they been included, the fair value of borrowings at
September 30, 2009 and December 31, 2008 would have been reduced by $3,367
million and $3,776 million,
respectively.
|
(e)
|
Net
of reinsurance of $2,300 million and $3,103 million at September 30, 2009
and December 31, 2008,
respectively.
|
Loan
Commitments
|
Notional
amount at
|
|
September
30,
|
|
December
31,
|
(in
millions)
|
2009
|
|
2008
|
|
|
|
|
|
Ordinary
course of business lending commitments (a)(b)
|
$
|
7,370
|
|
$
|
8,507
|
Unused
revolving credit lines(c)
|
|
|
|
|
|
Commercial
|
|
30,259
|
|
|
26,300
|
Consumer
– principally credit cards
|
|
245,764
|
|
|
252,867
|
|
|
|
|
|
|
(a)
|
Excluded
investment commitments of $2,493 million and $3,501 million as of
September 30, 2009 and December 31, 2008,
respectively.
|
(b)
|
Included
a $1,004 million and $1,067 million commitment as of September 30, 2009
and December 31, 2008, respectively, associated with a secured financing
arrangement that can increase to a maximum of $4,943 million based on the
asset volume under the arrangement.
|
(c)
|
Excluded
inventory financing arrangement, which may be withdrawn at our option, of
$13,234 million and $14,503 million as of September 30, 2009 and December
31, 2008, respectively.
|
Derivatives
and Hedging
On
January 1, 2009, in accordance with FASB ASC 815, we began disclosing additional
qualitative and quantitative information about our derivative and hedging
activities. The following disclosures should be read in the context of our
existing disclosure in Note 29 to the consolidated financial statements in our
2008 Form 10-K.
As a
matter of policy, we use derivatives for risk management purposes. We do not use
derivatives for speculative purposes. A key risk management objective for our
financial services businesses is to mitigate interest rate and currency risk by
seeking to ensure that the characteristics of the debt match the assets they are
funding. If the form (fixed versus floating) and currency denomination of the
debt we issue do not match the related assets, we typically execute derivatives
to adjust the nature and tenor of debt funding to meet this objective. The
determination of whether a derivative is used to achieve this objective depends
on a number of factors, including customer needs for specific types of
financing, and market factors affecting the type of debt we can
issue.
Of the
outstanding notional amount of $353,000 million, approximately 87%, or $305,000
million, is associated with reducing or eliminating the interest rate, currency
or market risk between financial assets and liabilities in our financial
services businesses. The remaining derivatives activity primarily relates to
hedging against adverse changes in currency exchange rates and commodity prices
related to anticipated sales and purchases. These activities are designated as
hedges when practicable. When it is not possible to apply hedge accounting, or
when the derivative and the hedged item are both recorded in earnings currently,
the derivatives are accounted for as economic hedges and hedge accounting is not
applied. This most frequently occurs when we hedge a recognized foreign currency
transaction (e.g., a receivable or payable) with a derivative. Since the effects
of changes in exchange rates are reflected currently in earnings for both the
derivative and the underlying, the economic hedge does not require hedge
accounting.
The
following table provides information about the fair value of our derivatives, by
contract type, separating those accounted for as hedges and those that are
not.
|
At
September 30, 2009
|
|
Fair
value
|
(In
millions)
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
Derivatives
accounted for as hedges
|
|
|
|
|
|
Interest
rate contracts
|
$
|
5,535
|
|
$
|
3,690
|
Currency
exchange contracts
|
|
4,170
|
|
|
3,489
|
Other
contracts
|
|
31
|
|
|
10
|
|
|
9,736
|
|
|
7,189
|
|
|
|
|
|
|
Derivatives
not accounted for as hedges
|
|
|
|
|
|
Interest
rate contracts
|
|
1,125
|
|
|
1,022
|
Currency
exchange contracts
|
|
1,693
|
|
|
856
|
Other
contracts
|
|
426
|
|
|
107
|
|
|
3,244
|
|
|
1,985
|
Netting
adjustment(a)
|
|
(4,758)
|
|
|
(4,784)
|
|
|
|
|
|
|
Total
|
$
|
8,222
|
|
$
|
4,390
|
|
|
|
|
|
|
Derivatives
are classified in the captions “All other assets” and “All other liabilities” in
our financial statements.
(a)
|
The
netting of derivative receivables and payables is permitted when a legally
enforceable master netting agreement exists. Amounts included fair value
adjustments related to our own and counterparty credit risk. At September
30, 2009 and December 31, 2008, the cumulative adjustment for
non-performance risk was a gain of $26 million and $177 million,
respectively.
|
For
relationships designated as fair value hedges, which relate entirely to hedges
of debt, changes in fair value of the derivatives are recorded in earnings along
with offsetting adjustments to the carrying amount of the hedged debt. Through
September 30, 2009, such adjustments increased the carrying amount of debt
outstanding by $4,355 million. The following table provides information about
the earnings effects of our fair value hedging relationships for the three and
nine months ended September 30, 2009.
|
|
|
Three
months ended
|
|
Nine
months ended
|
|
|
|
September
30, 2009
|
|
September
30, 2009
|
(In
millions)
|
|
|
Gain
(loss)
|
|
Gain
(loss)
|
|
Gain
(loss)
|
|
Gain
(loss)
|
|
|
|
on
hedging
|
|
on
hedged
|
|
on
hedging
|
|
on
hedged
|
|
Financial
statement caption
|
|
derivatives
|
|
items
|
|
derivatives
|
|
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
Interest
and other financial charges
|
|
$
|
1,559
|
|
$
|
(1,768)
|
|
$
|
(3,621)
|
|
$
|
3,478
|
Currency
exchange contracts
|
Interest
and other financial charges
|
|
|
(36)
|
|
|
53
|
|
|
(1,094)
|
|
|
1,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges resulted in $(192) million and $(152) million of ineffectiveness of
which $(153) million and $(228) million reflects amounts excluded from the
assessment of effectiveness for the three and nine months ended September 30,
2009, respectively.
For
derivatives that are designated as hedges of net investment in a foreign
operation, we assess effectiveness based on changes in spot currency exchange
rates. Changes in spot rates on the derivative are recorded in the currency
translation adjustments subaccount of AOCI until such time as the foreign entity
is substantially liquidated or sold. The change in fair value of the forward
points, which reflects the interest rate differential between the two countries
on the derivative, are excluded from the effectiveness assessment and are
recorded currently in earnings.
The
following tables provide additional information about the financial statement
effects related to our cash flow hedges and net investment hedges for the three
and nine months ended September 30, 2009.
|
|
|
|
Financial
statement caption
|
|
Gain
(loss)
|
|
|
|
reclassified
|
|
|
Gain
(loss)
|
from
AOCI
|
|
|
recognized
|
into
|
Three
months ended September 30, 2009
|
|
in
OCI
|
earnings
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
$
|
27
|
|
Interest
and other financial charges
|
|
$
|
(495)
|
|
|
|
|
|
GECS
revenues from services
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Currency
exchange contracts
|
|
|
275
|
|
Interest
and other financial charges
|
|
|
228
|
|
|
|
|
|
Other
costs and expenses
|
|
|
(73)
|
|
|
|
|
|
GECS
revenues from services
|
|
|
(36)
|
|
|
|
|
|
Sales
of goods and services
|
|
|
53
|
|
|
|
|
|
Other
income
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
|
|
(34)
|
|
GECS
revenues from services
|
|
|
(24)
|
|
|
|
|
|
Other
costs and expenses
|
|
|
–
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
268
|
|
|
|
$
|
(342)
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss)
|
|
|
|
Gain
(loss)
|
|
recognized
|
reclassified
|
|
in
CTA
|
from
CTA
|
Net
investment hedges
|
|
|
|
|
|
|
|
|
Currency
exchange contracts
|
|
$
|
(1,702)
|
|
GECS
revenues from services
|
|
$
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
statement caption
|
|
Gain
(loss)
|
|
|
|
|
reclassified
|
|
|
Gain
(loss)
|
from
AOCI
|
|
|
recognized
|
into
|
Nine
months ended September 30, 2009
|
|
in
OCI
|
earnings
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
|
$
|
703
|
|
Interest
and other financial charges
|
|
$
|
(1,539)
|
|
|
|
|
|
GECS
revenues from services
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Currency
exchange contracts
|
|
|
2,603
|
|
Interest
and other financial charges
|
|
|
1,221
|
|
|
|
|
|
Other
costs and expenses
|
|
|
(181)
|
|
|
|
|
|
GECS
revenues from services
|
|
|
(98)
|
|
|
|
|
|
Sales
of goods and services
|
|
|
115
|
|
|
|
|
|
Other
income
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
|
|
–
|
|
GECS
revenues from services
|
|
|
–
|
|
|
|
|
|
Other
costs and expenses
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,306
|
|
|
|
$
|
(480)
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss)
|
|
|
|
Gain
(loss)
|
|
recognized
|
reclassified
|
|
in
CTA
|
from
CTA
|
Net
investment hedges
|
|
|
|
|
|
|
|
|
Currency
exchange contracts
|
|
$
|
(4,976)
|
|
GECS
revenues from services
|
|
$
|
(32)
|
|
|
|
|
|
|
|
|
|
Of the
total pre-tax amount recorded in AOCI, $3,126 million related to cash flow
hedges of forecasted transactions of which we expect to transfer $1,440 million
to earnings as an expense in the next 12 months contemporaneously with the
earnings effects of the related forecasted transactions. In the first nine
months of 2009, we recognized insignificant gains and losses related to hedged
forecasted transactions and firm commitments that did not occur by the end of
the originally specified period. At September 30, 2009, the maximum term of
derivative instruments that hedge forecasted transactions was 26 years and
related to hedges of anticipated interest payments associated with external
debt.
Changes
in the fair value of derivatives that are not designated as hedges are recorded
in earnings each period. As discussed above, these derivatives are entered into
as economic hedges of changes in interest rates, currency exchange rates,
commodity prices and other market risks. Gains or losses related to the
derivative are recorded in predefined captions in the Statement of Earnings,
typically “GECS revenues from services” or “Other income,” based on our
accounting policy. In general, the earnings effects of the item that represents
the economic risk exposure is recorded in the same caption as the derivative.
Gains for the first nine months of 2009 on derivatives not designated as hedges,
without considering the offsetting earnings effects from the item representing
the economic risk exposure, were $562 million, related to interest rate
contracts of $140 million, currency exchange contracts of $171 million and
equity, credit and commodity derivatives of $251 million.
To lower
our exposure to credit risk, our standard master agreements typically contain
mutual downgrade provisions that provide the ability of each party to require
assignment or termination if the long-term credit rating of the counterparty
were to fall below A-/A3. In certain of these master agreements, each party also
has the ability to require assignment or termination if the short-term rating of
the counterparty were to fall below A-1/P-1. The net derivative liability
subject to these provisions was approximately $2,687 million at September 30,
2009. In addition to these provisions, in certain of these master agreements, we
also have collateral arrangements that provide us with the right to hold
collateral (cash or U.S. Treasuries or other highly-rated securities) when the
current market value of derivative contracts exceeds a specified limit. We also
have a limited number of such collateral agreements under which we must post
collateral. Under these agreements and in the normal course of business, the
fair value of collateral posted by counterparties at September 30, 2009, was
approximately $7,978 million, of which $2,500 million was held in cash and
$5,478 million represented pledged securities. The fair value of collateral
posted by us was approximately $1,836 million, of which $1,771 million was cash
and $65 million represented securities repledged.
More
information regarding our counterparty credit risk and master agreements can be
found in Note 29 to the consolidated financial statements in our 2008 Form
10-K.
We do
not sell credit default swaps; however, as part of our risk management services,
we provide certain performance guarantees to third-party financial institutions
related to plain vanilla interest rate swaps on behalf of some customers related
to variable rate loans we have extended to them. The fair value of such
guarantees was $28 million at September 30, 2009. The aggregate fair value of
customer derivative contracts in a liability position at September 30, 2009, was
$314 million before consideration of any offsetting effect of collateral. At
September 30, 2009, collateral value was sufficient to cover the loan amount and
the fair value of the customer’s derivative, in the event we had been called
upon to perform under the derivative. Given our strict underwriting criteria, we
believe the likelihood that we will be required to perform under these
guarantees is remote.
16.
OFF-BALANCE SHEET ARRANGEMENTS
We
securitize financial assets and arrange other forms of asset-backed financing in
the ordinary course of business to improve shareowner returns. The
securitization transactions we engage in are similar to those used by many
financial institutions. Beyond improving returns, these securitization
transactions serve as funding sources for a variety of diversified lending and
securities transactions. Historically, we have used both GE-supported and
third-party Variable Interest Entities (VIEs) to execute off-balance sheet
securitization transactions funded in the commercial paper and term markets. The
largest single category of VIEs that we are involved with are Qualifying Special
Purpose Entities (QSPEs), which meet specific characteristics defined in U.S.
GAAP that exclude them from the scope of consolidation standards. Investors in
these entities only have recourse to the assets owned by the entity and not to
our general credit, unless noted below. We did not provide non-contractual
support to any consolidated VIE, unconsolidated VIE or QSPE in the nine months
ended September 30, 2009. We do not have implicit support arrangements with any
VIE or QSPE.
Variable
Interest Entities
When
evaluating whether we are the primary beneficiary of a VIE, and must therefore
consolidate the entity, we perform a qualitative analysis that considers the
design of the VIE, the nature of our involvement and the variable interests held
by other parties. If that evaluation is inconclusive as to which party absorbs a
majority of the entity’s expected losses or residual returns, a quantitative
analysis is performed to determine who is the primary beneficiary.
Consolidated
Variable Interest Entities
For
additional information about our consolidated VIEs, see Note 30 to the
consolidated financial statements in our 2008 Form 10-K. Consolidated VIEs at
September 30, 2009 and December 31, 2008 follow:
|
At
|
|
September
30, 2009
|
|
December
31, 2008
|
(In
millions)
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated,
liquidating securitization entities(a)
|
$
|
2,790
|
|
$
|
2,969
|
|
$
|
4,000
|
|
$
|
3,868
|
Trinity(b)
|
|
7,657
|
|
|
9,447
|
|
|
9,192
|
|
|
11,623
|
Penske
Truck Leasing Co., L.P. (PTL)(c)
|
|
–
|
|
|
–
|
|
|
7,444
|
|
|
1,339
|
Other(d)
|
|
5,471
|
|
|
3,062
|
|
|
6,062
|
|
|
4,432
|
|
$
|
15,918
|
|
$
|
15,478
|
|
$
|
26,698
|
|
$
|
21,262
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
If
the short-term credit rating of GE Capital or these entities were reduced
below A–1/P–1, we could be required to provide substitute liquidity for
those entities or provide funds to retire the outstanding commercial
paper. The maximum net amount that we could be required to provide in the
event of such a downgrade is determined by contract and totaled $2,900
million at September 30, 2009. The borrowings of these entities are
reflected in our Statement of Financial
Position.
|
(b)
|
If
the long-term credit rating of GE Capital were to fall below AA-/Aa3 or
its short-term credit rating were to fall below A-1+/P-1, GE Capital could
be required to provide approximately $2,917 million to such entities as of
September 30, 2009 pursuant to letters of credit issued by GE Capital. To
the extent that the entities’ liabilities exceed the ultimate value of the
proceeds from the sale of their assets and the amount drawn under the
letters of credit, GE Capital could be required to provide such excess
amount. The borrowings of these entities are reflected in our Statement of
Financial Position.
|
(c)
|
In
the first quarter of 2009, we sold a 1% limited partnership interest in
PTL, a previously consolidated VIE, to Penske Truck Leasing Corporation,
the general partner of PTL, whose majority shareowner is a member of GE’s
Board of Directors. The disposition of the shares, coupled with our
resulting minority position on the PTL advisory committee and related
changes in our contractual rights, resulted in the deconsolidation of PTL.
We recognized a pre-tax gain on the sale of $296 million, including a gain
on the remeasurement of our retained investment of $189 million. The
measurement of the fair value of our retained investment in PTL was based
on a methodology that incorporated both discounted cash flow information
and market data. In applying this methodology, we utilized different
sources of information, including actual operating results, future
business plans, economic projections and market observable pricing
multiples of similar businesses. The resulting fair value reflected our
position as a noncontrolling shareowner at the conclusion of the
transaction.
|
(d)
|
A
majority of the remaining assets and liabilities of VIEs that are included
in our consolidated financial statements were acquired in transactions
subsequent to January 1, 2004. Assets of these entities consist of
amortizing securitizations of financial assets originated by acquirees in
Australia and Japan, and real estate partnerships. We have no recourse
arrangements with these entities.
|
Unconsolidated
Variable Interest Entities
Our
involvement with unconsolidated VIEs consists of the following activities:
assisting in the formation and financing of an entity, providing recourse and/or
liquidity support, servicing the assets and receiving variable fees for services
provided. The classification in our financial statements of our variable
interests in these entities depends on the nature of the entity. As described
below, our retained interests in securitization-related VIEs and QSPEs is
reported in financing receivables or investment securities depending on its
legal form. Variable interests in partnerships and corporate entities would be
classified as either equity method or cost method investments.
In the
ordinary course of business, we make investments in entities in which we are not
the primary beneficiary, but may hold a variable interest such as limited
partner equity interests or mezzanine debt investment. These investments are
classified in two captions in our financial statements: “All other assets” for
investments accounted for under the equity method, and “GECS financing
receivables” for debt financing provided to these entities.
Investments
in unconsolidated VIEs at September 30, 2009 and December 31, 2008
follow:
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Other
assets(a)
|
$
|
8,991
|
|
$
|
2,919
|
Financing
receivables
|
|
712
|
|
|
1,045
|
Total
investment
|
|
9,703
|
|
|
3,964
|
Contractual
obligations to fund new investments
|
|
1,488
|
|
|
1,159
|
Maximum
exposure to loss
|
$
|
11,191
|
|
$
|
5,123
|
|
|
|
|
|
|
(a)
|
At
September 30, 2009, our remaining investment in PTL of $5,991 million
comprised a 49.9% partnership interest of $950 million and loans and
advances of $5,041 million.
|
Other
than those entities described above, we also hold passive investments in RMBS,
CMBS and asset-backed securities issued by entities that may be either VIEs or
QSPEs. Such investments were, by design, investment grade at issuance and held
by a diverse group of investors. As we have no formal involvement in such
entities beyond our investment, we believe that the likelihood is remote that we
would be required to consolidate them. Further information about such
investments is provided in Note 3.
Securitization
Activities
We
transfer assets to QSPEs in the ordinary course of business as part of our
ongoing securitization activities. In our securitization transactions, we
transfer assets to a QSPE and receive a combination of cash and retained
interests in the assets transferred. The QSPE sells beneficial interests in the
assets transferred to third-party investors, to fund the purchase of the
assets.
The
financing receivables in our QSPEs have similar risks and characteristics to our
on-book financing receivables and were underwritten to the same standard.
Accordingly, the performance of these assets has been similar to our on-book
financing receivables; however, the blended performance of the pools of
receivables in our QSPEs reflects the eligibility screening requirements that we
apply to determine which receivables are selected for sale. Therefore, the
blended performance can differ from the on-book performance.
When we
securitize financing receivables we retain interests in the transferred
receivables in two forms: a seller’s interest in the assets of the QSPE, which
we classify as financing receivables, and subordinated interests in the assets
of the QSPE, which we classify as investment securities. In certain credit card
receivables trusts, we are required to maintain minimum free equity
(subordinated interest) of 4% or 7% depending on the credit rating of GE
Capital.
Financing
receivables transferred to securitization entities that remained outstanding and
our retained interests in those financing receivables at September 30, 2009 and
December 31, 2008 follow.
|
|
|
Commercial
|
|
Credit
card
|
|
Other
|
|
Total
|
(In
millions)
|
Equipment
|
(a)(b)(c)
|
real
estate
|
(b)
|
receivables
|
(c)
|
assets
|
(b)
|
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
amount outstanding
|
$
|
10,702
|
|
$
|
7,533
|
|
$
|
24,570
|
|
$
|
4,005
|
|
$
|
46,810
|
Included
within the amount above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
are
retained interests of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
receivables(d)
|
|
168
|
|
|
–
|
|
|
1,770
|
|
|
–
|
|
|
1,938
|
Investment
securities
|
|
1,084
|
|
|
253
|
|
|
6,712
|
|
|
329
|
|
|
8,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
amount outstanding
|
$
|
13,298
|
|
$
|
7,970
|
|
$
|
26,046
|
|
$
|
5,250
|
|
$
|
52,564
|
Included
within the amount above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
are
retained interests of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
receivables(d)
|
|
339
|
|
|
–
|
|
|
3,802
|
|
|
–
|
|
|
4,141
|
Investment
securities
|
|
747
|
|
|
222
|
|
|
4,806
|
|
|
532
|
|
|
6,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Included
inventory floorplan receivables.
|
(b)
|
In
certain transactions entered into prior to December 31, 2004, we provided
contractual credit and liquidity support to third parties who purchased
debt in the QSPEs. We have not entered into additional arrangements since
that date. At September 30, 2009 and December 31, 2008, liquidity support
totaled $2,098 million and $2,143 million, respectively. Credit support
totaled $2,097 million and $2,164 million at September 30, 2009 and
December 31, 2008, respectively.
|
(c)
|
As
permitted by the terms of the applicable trust documents, in the second
and third quarters of 2009, we transferred $268 million of floorplan
financing receivables to the GE Dealer Floorplan Master Note Trust and
$328 million of credit card receivables to the GE Capital Credit Card
Master Note Trust in exchange for additional subordinated interests. These
actions had the effect of maintaining the AAA ratings of certain
securities issued by these
entities.
|
(d)
|
Uncertificated
seller’s interests.
|
When we
transfer financing receivables, we determine the fair value of retained
interests received as part of the securitization transaction. Further
information about how fair value is determined is presented in Note 14. Retained
interests in securitized receivables that are classified as investment
securities are reported at fair value in each reporting period. These assets
decrease as cash is received on the underlying financing receivables. Retained
interests classified as financing receivables are accounted for in a similar
manner to our on-book financing receivables.
Key
assumptions used in measuring the fair value of retained interests classified as
investment securities and the sensitivity of the current fair value to changes
in those assumptions related to all outstanding retained interests at September
30, 2009 and December 31, 2008 follow.
|
|
|
Commercial
|
|
Credit
card
|
|
Other
|
|
(In
millions)
|
Equipment
|
|
real
estate
|
|
receivables
|
|
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate(a)
|
|
9.2
|
%
|
|
20.5
|
%
|
|
11.2
|
%
|
|
5.5
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(13)
|
|
$
|
(13)
|
|
$
|
(69)
|
|
$
|
(1)
|
|
20%
adverse change
|
|
(26)
|
|
|
(25)
|
|
|
(136)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment
rate(a)(b)
|
|
23.5
|
%
|
|
10.8
|
%
|
|
9.4
|
%
|
|
54.4
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(4)
|
|
$
|
(2)
|
|
$
|
(56)
|
|
$
|
-
|
|
20%
adverse change
|
|
(8)
|
|
|
(4)
|
|
|
(103)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimate
of credit losses(a)
|
|
1.8
|
%
|
|
3.0
|
%
|
|
16.0
|
%
|
|
0.1
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(6)
|
|
$
|
(3)
|
|
$
|
(231)
|
|
$
|
-
|
|
20%
adverse change
|
|
(13)
|
|
|
(7)
|
|
|
(459)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
lives (in months)
|
|
10
|
|
|
53
|
|
|
10
|
|
|
3
|
|
Net
credit losses for the quarter
|
$
|
113
|
|
$
|
109
|
|
$
|
1,333
|
|
$
|
11
|
|
Delinquencies
|
|
163
|
|
|
175
|
|
|
1,561
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate(a)
|
|
17.6
|
%
|
|
25.8
|
%
|
|
15.1
|
%
|
|
13.4
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(15)
|
|
$
|
(14)
|
|
$
|
(53)
|
|
$
|
(1)
|
|
20%
adverse change
|
|
(30)
|
|
|
(26)
|
|
|
(105)
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment
rate(a)(b)
|
|
19.5
|
%
|
|
11.3
|
%
|
|
9.6
|
%
|
|
52.0
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(2)
|
|
$
|
(3)
|
|
$
|
(60)
|
|
$
|
-
|
|
20%
adverse change
|
|
(5)
|
|
|
(7)
|
|
|
(118)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimate
of credit losses(a)
|
|
0.7
|
%
|
|
1.3
|
%
|
|
16.2
|
%
|
|
-
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(5)
|
|
$
|
(2)
|
|
$
|
(223)
|
|
$
|
-
|
|
20%
adverse change
|
|
(10)
|
|
|
(4)
|
|
|
(440)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
lives (in months)
|
|
14
|
|
|
55
|
|
|
10
|
|
|
4
|
|
Net
credit losses for the year
|
$
|
89
|
|
$
|
28
|
|
$
|
1,512
|
|
$
|
5
|
|
Delinquencies
|
|
123
|
|
|
260
|
|
|
1,833
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Based
on weighted averages.
|
(b)
|
Represented
a payment rate on credit card receivables, inventory financing receivables
(included within equipment) and trade receivables (included within other
assets).
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows on transfers
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from new transfers
|
$
|
3,724
|
|
$
|
657
|
|
$
|
6,924
|
|
$
|
4,313
|
Proceeds
from collections reinvested in revolving
|
|
|
|
|
|
|
|
|
|
|
|
period
transfers
|
|
14,770
|
|
|
18,155
|
|
|
45,798
|
|
|
57,210
|
Cash
flows on retained interests recorded as
|
|
|
|
|
|
|
|
|
|
|
|
investment
securities
|
|
1,787
|
|
|
1,420
|
|
|
5,141
|
|
|
4,451
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
on GECS revenues from services
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain on sale
|
$
|
449
|
|
$
|
317
|
|
$
|
1,169
|
|
$
|
1,022
|
Change
in fair value of retained interests
|
|
|
|
|
|
|
|
|
|
|
|
recorded
in earnings
|
|
38
|
|
|
103
|
|
|
210
|
|
|
10
|
Other-than-temporary
impairments
|
|
(44)
|
|
|
(54)
|
|
|
(106)
|
|
|
(197)
|
Our
QSPEs use derivatives to eliminate interest rate risk between the assets and
liabilities. At inception of the transaction, the QSPE will enter into
derivative contracts to receive a floating rate of interest and pay a fixed rate
with terms that effectively match those of the financial assets held. In some
cases, we are the counterparty to such derivative contracts, in which case a
second derivative is executed with a third party to substantially eliminate the
exposure created by the first derivative. The fair value of such derivative
contracts was a net asset of $514 million and $752 million at September 30, 2009
and December 31, 2008, respectively. We have no other derivatives arrangements
with QSPEs or other VIEs.
Servicing
Activities
The
amount of our servicing assets and liabilities was insignificant at September
30, 2009 and December 31, 2008. We received servicing fees from QSPEs of $144
million and $162 million, respectively, for the three months ended September 30,
2009 and 2008, and $447 million and $486 million, respectively, for the first
nine months ended September 30, 2009 and 2008.
At
September 30, 2009 and December 31, 2008, accounts payable included $3,832
million and $4,446 million, respectively, representing obligations to QSPEs for
collections received in our capacity as servicer from obligors of the
QSPEs.
Included
in other GECS receivables at September 30, 2009 and December 31, 2008, were
$2,802 million and $2,346 million, respectively, relating to amounts owed by
QSPEs to GE, principally for the purchase of financial assets.
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividends to GE or capital contributions from GE to GECS; GE customer
receivables sold to GECS; GECS services for trade receivables management and
material procurement; buildings and equipment (including automobiles) leased by
GE from GECS; information technology (IT) and other services sold to GECS by GE;
aircraft engines manufactured by GE that are installed on aircraft purchased by
GECS from third-party producers for lease to others; medical equipment
manufactured by GE that is leased by GECS to others; and various investments,
loans and allocations of GE corporate overhead costs.
These
intercompany transactions are reported in the GE and GECS columns of our
financial statements (and include customer receivables sold from GE to GECS),
but are eliminated in deriving our consolidated financial statements. The
effects of these eliminations on our consolidated cash flows from operating,
investing and financing activities follow.
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) operating activities –
|
|
|
|
|
|
continuing
operations
|
$
|
13,434
|
|
$
|
31,779
|
Elimination
of GECS dividend to GE
|
|
–
|
|
|
(2,291)
|
Net
increase in GE customer receivables sold to GECS
|
|
(372)
|
|
|
(1,255)
|
Other
reclassifications and eliminations
|
|
951
|
|
|
(429)
|
Consolidated
cash from (used for) operating activities – continuing
operations
|
$
|
14,013
|
|
$
|
27,804
|
|
|
|
|
|
|
Investing
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) investing activities –
|
|
|
|
|
|
continuing
operations
|
$
|
25,809
|
|
$
|
(52,947)
|
Net
increase in GE customer receivables sold to GECS
|
|
372
|
|
|
1,255
|
Capital
contribution from GE to GECS
|
|
9,500
|
|
|
–
|
Other
reclassifications and eliminations
|
|
(939)
|
|
|
174
|
Consolidated
cash from (used for) investing activities – continuing
operations
|
$
|
34,742
|
|
$
|
(51,518)
|
|
|
|
|
|
|
Financing
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) financing activities –
|
|
|
|
|
|
continuing
operations
|
$
|
(26,714)
|
|
$
|
21,600
|
Elimination
of short-term intercompany borrowings(a)
|
|
824
|
|
|
370
|
Elimination
of GECS dividend to GE
|
|
–
|
|
|
2,291
|
Capital
contribution from GE to GECS
|
|
(9,500)
|
|
|
–
|
Other
reclassifications and eliminations
|
|
(178)
|
|
|
23
|
Consolidated
cash from (used for) financing activities – continuing
operations
|
$
|
(35,568)
|
|
$
|
24,284
|
|
|
|
|
|
|
|
Includes
GE investment in GECS short-term borrowings, such as commercial
paper.
|
In the
GE and GECS columns of our Statement of Cash Flows for the year ended December
31, 2008, we properly reported a $5,500 million capital contribution from GE to
GECS as an investing use of cash by GE (included in the caption “All other
investing activities”) and a financing source of cash to GECS (included in the
caption “All other financing activities”). This intercompany transaction was not
eliminated in deriving our consolidated cash flows. As a result, our
consolidated cash used for investing activities and our consolidated cash from
financing activities were both overstated by the amount of the capital
contribution. This item had no effect on our consolidated cash from operating
activities or total consolidated cash flows, nor did it affect our financial
position or results of operations. We will correct this immaterial item in our
2009 Annual Report on Form 10-K.
A.
Results of Operations
General
Electric Company’s consolidated financial statements represent the combination
of the industrial manufacturing and product services businesses of General
Electric Company (GE) and the financial services businesses of General Electric
Capital Services, Inc. (GECS or financial services).
In the
accompanying analysis of financial information, we sometimes use information
derived from consolidated financial information but not presented in our
financial statements prepared in accordance with U.S. generally accepted
accounting principles (GAAP). Certain of these data are considered “non-GAAP
financial measures” under the U.S. Securities and Exchange Commission (SEC)
rules. For such measures, we have provided supplemental explanations and
reconciliations in Exhibit 99(a) to this Form 10-Q Report.
Unless
otherwise indicated, we refer to captions such as revenues and earnings from
continuing operations attributable to the Company simply as “revenues” and
“earnings” throughout this Management’s Discussion and Analysis. Similarly,
discussion of other matters in our condensed, consolidated financial statements
relates to continuing operations unless otherwise indicated.
Overview
Earnings
from continuing operations attributable to the Company decreased 45% to $2.454
billion in the third quarter of 2009 compared with $4.477 billion in the third
quarter of 2008. Earnings per share (EPS) from continuing operations were $0.22
in the third quarter of 2009, down 51% compared with $0.45 in the third quarter
of 2008.
For the
first nine months of 2009, earnings from continuing operations attributable to
the Company decreased 42% to $8.187 billion compared with $14.222 billion for
the same period in 2008. EPS from continuing operations were $0.75 in the first
nine months of 2009, down 47% compared with $1.42 in the first nine months of
2008.
Earnings
from discontinued operations, net of taxes, was an insignificant amount in the
third quarter of 2009 compared with a loss of $0.2 billion in the third quarter
of 2008, and included the results of GE Money Japan (our Japanese personal loan
business, Lake, and Japanese mortgage and card businesses, excluding our
investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC),
Plastics, Advanced Materials, most of GE Insurance Solutions Corporation (GE
Insurance Solutions), GE Life and Genworth Financial, Inc.
(Genworth).
Loss
from discontinued operations, net of taxes, was $0.2 billion for the first nine
months of 2009 compared with $0.5 billion for the same period in
2008.
Net
earnings attributable to GE common shareowners decreased 44% to $2.419 billion
and EPS decreased 47% to $0.23 in the third quarter of 2009 compared with $4.312
billion and $0.43, respectively, in the third quarter of 2008.
For the
first nine months of 2009, net earnings attributable to GE common shareowners
decreased 43% to $7.787 billion, compared with $13.688 billion for the same
period in 2008, and EPS decreased 47% to $0.73, compared with $1.37 in the first
nine months of 2008.
Revenues
of $37.8 billion in the third quarter of 2009 were 20% lower than in the third
quarter of 2008, reflecting organic revenue declines, the stronger U.S. dollar,
the lack of a current-year counterpart to the third quarter 2008 Olympics
broadcasts and the net effects of acquisitions and dispositions, including the
effect of the deconsolidation of Penske Truck Leasing Co., L.P. (PTL).
Industrial sales decreased 13% to $25.1 billion, reflecting organic revenue
declines, the lack of a current-year counterpart to the third quarter 2008
Olympics broadcasts and the stronger U.S. dollar. Sales of product services
(including sales of spare parts and related services) of $8.5 billion in the
third quarter of 2009 were about the same compared with the third quarter of
2008. Financial services revenues decreased 31% over the comparable period of
last year to $12.7 billion, reflecting organic revenue declines, the net effects
of acquisitions and dispositions and the stronger U.S. dollar.
Revenues
of $115.3 billion for the first nine months of 2009 were 15% lower than revenues
of $136.3 billion for the first nine months of 2008, reflecting organic revenue
declines, the stronger U.S. dollar, the net effects of acquisitions and
dispositions (including the effect of the deconsolidation of PTL) and the lack
of a current-year counterpart to the third quarter 2008 Olympics broadcasts.
Industrial sales of $75.2 billion were 7% lower than in 2008 reflecting organic
revenue declines, the stronger U.S. dollar and the lack of a current-year
counterpart to the 2008 Olympics broadcasts. Financial services revenues for the
first nine months of 2009 decreased 27% to $40.7 billion as a result of organic
revenue declines, the stronger U.S. dollar and the net effects of acquisitions
and dispositions.
Overall,
acquisitions contributed $0.9 billion and $1.7 billion to consolidated revenues
in the third quarters of 2009 and 2008, respectively. Our consolidated earnings
in the third quarters of 2009 and 2008 included approximately $0.1 billion and
$0.2 billion, respectively, from acquired businesses. We integrate acquisitions
as quickly as possible. Only revenues and earnings from the date we complete the
acquisition through the end of the fourth following quarter are attributed to
such businesses. Dispositions also affected our operations through lower
revenues of $1.5 billion and $0.1 billion in the third quarters of 2009 and
2008, respectively. The effect of dispositions on earnings was an insignificant
amount in both the third quarters of 2009 and 2008.
Acquisitions
contributed $3.5 billion and $6.1 billion to consolidated revenues in the first
nine months of 2009 and 2008, respectively. Our consolidated net earnings in the
first nine months of 2009 and 2008 included approximately $0.9 billion and $0.6
billion, respectively, from acquired businesses. Dispositions also affected our
operations through lower revenues of $3.6 billion in the first nine months of
2009 and higher revenues of $0.3 billion in the first nine months of 2008. The
effect of dispositions on earnings was an increase of $0.4 billion in both the
first nine months of 2009 and 2008.
The most
significant acquisitions affecting results in 2009 were CitiCapital, BAC
Credomatic (BAC), Interbanca S.p.A. and Bank BPH at Capital Finance; Airfoils
Technologies International – Singapore Pte. Ltd. (ATI-Singapore) and Vital
Signs, Inc. at Technology Infrastructure; and Hydril Pressure Control at Energy
Infrastructure.
Segment
Operations
Operating
segments comprise our five businesses focused on the broad markets they serve:
Energy Infrastructure, Technology Infrastructure, NBC Universal, Capital Finance
and Consumer & Industrial.
Segment
profit is determined based on internal performance measures used by the Chief
Executive Officer to assess the performance of each business in a given period.
In connection with that assessment, the Chief Executive Officer may exclude
matters such as charges for restructuring; rationalization and other similar
expenses; in-process research and development and certain other
acquisition-related charges and balances; technology and product development
costs; certain gains and losses from acquisitions or dispositions; and
litigation settlements or other charges, responsibility for which preceded the
current management team.
Segment
profit always excludes the effects of principal pension plans, results reported
as discontinued operations, earnings attributable to noncontrolling interests of
consolidated subsidiaries and accounting changes. Segment profit excludes or
includes interest and other financial charges and income taxes according to how
a particular segment’s management is measured – excluded in determining segment
profit, which we sometimes refer to as “operating profit,” for Energy
Infrastructure, Technology Infrastructure, NBC Universal and Consumer &
Industrial; included in determining segment profit, which we sometimes refer to
as “net earnings,” for Capital Finance.
We have
reclassified certain prior-period amounts to conform to the current-period’s
presentation. In addition to providing information on segments in their
entirety, we have also provided supplemental information for certain businesses
within the segments.
Energy
Infrastructure
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
8,917
|
|
$
|
9,769
|
|
$
|
26,733
|
|
$
|
27,164
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
1,582
|
|
$
|
1,425
|
|
$
|
4,646
|
|
$
|
4,074
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Energy(a)
|
$
|
7,128
|
|
$
|
8,015
|
|
$
|
21,872
|
|
$
|
22,283
|
Oil
& Gas
|
|
1,953
|
|
|
1,891
|
|
|
5,444
|
|
|
5,321
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
|
|
|
Energy(a)
|
$
|
1,273
|
|
$
|
1,143
|
|
$
|
3,965
|
|
$
|
3,426
|
Oil
& Gas
|
|
338
|
|
|
305
|
|
|
800
|
|
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Effective
January 1, 2009, our Water business was combined with Energy. Prior-period
amounts were reclassified to conform to the current-period’s
presentation.
|
Energy
Infrastructure revenues decreased 9%, or $0.9 billion, in the third quarter of
2009 as lower volume ($0.8 billion), the stronger U.S. dollar ($0.2 billion) and
lower other income ($0.1 billion), primarily related to the lack of a
current-year counterpart to transaction gains, were partially offset by higher
prices ($0.3 billion). Lower volume at Energy related to decreases in equipment
sales was partially offset by higher volume at Oil & Gas, primarily related
to increases in equipment sales. The effects of the stronger U.S. dollar were at
both Oil & Gas and Energy. Higher prices were primarily at
Energy.
Segment
profit increased 11%, or $0.2 billion, as higher prices ($0.3 billion) and lower
material and other costs ($0.1 billion) were partially offset by lower other
income ($0.2 billion), primarily related to the lack of a current-year
counterpart to transaction gains, and lower volume ($0.1 billion). Lower
material and other costs were primarily at Energy. The decrease in volume was at
Energy.
Energy
Infrastructure revenues decreased 2%, or $0.4 billion, in the first nine months
of 2009 as higher prices ($1.0 billion) and higher volume ($0.1 billion),
including customer contract termination fees, were more than offset by the
stronger U.S. dollar ($1.0 billion) and lower other income ($0.5 billion),
primarily related to marks on foreign currency contracts and the lack of a
current-year counterpart to transaction gains. The increase in price was
primarily at Energy. The increase in volume reflected increased equipment sales
at Oil & Gas, partially offset by decreased equipment sales at Energy. The
effects of the stronger U.S. dollar were at both Oil & Gas and
Energy.
Segment
profit for the first nine months of 2009 increased 14%, or $0.6 billion, as
higher prices ($1.0 billion), lower material and other costs ($0.2 billion) and
the effects of productivity ($0.1 billion) were partially offset by lower other
income ($0.6 billion), primarily related to marks on foreign currency contracts
and the lack of a current-year counterpart to transaction gains, and the
stronger U.S. dollar ($0.1 billion). Lower material and other costs were
primarily at Energy, while the effects of productivity were primarily at Oil
& Gas. The effects of the stronger U.S. dollar were at Oil & Gas.
Included in segment results was a decrease of $0.2 billion to revenues and $0.1
billion to segment profit related to a change in estimate of measuring progress
towards long-term contract completion at Vetco Gray.
Technology
Infrastructure
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
10,209
|
|
$
|
11,450
|
|
$
|
31,200
|
|
$
|
33,761
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
1,748
|
|
$
|
1,900
|
|
$
|
5,384
|
|
$
|
5,657
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Aviation
|
$
|
4,542
|
|
$
|
4,841
|
|
$
|
13,978
|
|
$
|
14,084
|
Enterprise
Solutions
|
|
904
|
|
|
1,192
|
|
|
2,735
|
|
|
3,532
|
Healthcare
|
|
3,801
|
|
|
4,191
|
|
|
11,310
|
|
|
12,569
|
Transportation
|
|
970
|
|
|
1,256
|
|
|
3,210
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
|
|
|
Aviation
|
$
|
970
|
|
$
|
834
|
|
$
|
2,973
|
|
$
|
2,523
|
Enterprise
Solutions
|
|
103
|
|
|
187
|
|
|
295
|
|
|
503
|
Healthcare
|
|
508
|
|
|
634
|
|
|
1,509
|
|
|
1,909
|
Transportation
|
|
177
|
|
|
255
|
|
|
630
|
|
|
750
|
Technology
Infrastructure revenues decreased 11%, or $1.2 billion, in the third quarter of
2009 as lower volume ($1.2 billion), the stronger U.S. dollar ($0.1 billion) and
lower other income ($0.1 billion) were partially offset by higher prices ($0.1
billion). The decrease in volume was across all businesses in the segment. The
effects of the stronger U.S. dollar were primarily at Healthcare. Higher prices
were primarily at Aviation.
Segment
profit decreased 8%, or $0.2 billion, primarily from lower volume ($0.2 billion)
and lower other income ($0.1 billion), partially offset by higher prices ($0.1
billion). The decrease in volume was across all businesses in the
segment.
Technology
Infrastructure revenues decreased 8%, or $2.6 billion, in the first nine months
of 2009 as lower volume ($2.5 billion) and the stronger U.S. dollar ($0.7
billion) were partially offset by higher prices ($0.4 billion) and gains related
to acquisitions and dispositions ($0.4 billion), including the ATI-Singapore
acquisition and the Times Microwave Systems disposition. The decrease in volume
was across all businesses in the segment. The effects of the stronger U.S.
dollar were at Healthcare, Enterprise Solutions and Aviation. Higher prices,
primarily at Aviation, were partially offset by lower prices at
Healthcare.
Segment
profit for the first nine months of 2009 decreased 5%, or $0.3 billion,
primarily from lower volume ($0.6 billion), lower productivity ($0.1 billion),
higher labor and other costs ($0.1 billion) and the stronger U.S. dollar ($0.1
billion), partially offset by higher prices ($0.4 billion) and gains related to
acquisitions and dispositions ($0.4 billion), including the ATI-Singapore
acquisition and the Times Microwave Systems disposition. The decrease in volume
was across all businesses in the segment. The effects of productivity at
Transportation, Healthcare and Enterprise Solutions were partially offset by
Aviation.
NBC Universal revenues of $4.1
billion decreased 20%, or $1.0 billion, in the third quarter of 2009 as lower
revenues in our broadcast television business ($1.0 billion), reflecting the
lack of a current-year counterpart to the 2008 Olympics broadcasts and the
effects of lower advertising revenues, lower revenues in film ($0.3 billion) and
lower earnings and higher impairments related to associated companies ($0.3
billion) were partially offset by a gain relating to A&E Television Network
(AETN) ($0.6 billion) and higher revenues in cable ($0.1 billion). During the
third quarter of 2009, Lifetime Entertainment Services was contributed by third
parties to AETN (in which we hold an equity method investment). As a result, our
ownership in AETN was diluted from 25.0% to 15.8%, resulting in a pre-tax gain
of $0.6 billion which is reported in other income. Segment profit of $0.7
billion increased 13%, or $0.1 billion, as the gain related to AETN ($0.6
billion) and higher earnings in our broadcast television business ($0.2
billion), reflecting the lack of a current-year counterpart to losses from the
2008 Olympics broadcasts which more than offset the effects of lower advertising
revenues, were partially offset by lower earnings and higher impairments related
to associated companies ($0.3 billion), lower earnings in film ($0.2 billion)
and lack of current-year counterpart to 2008 proceeds from insurance claims
($0.1 billion).
NBC
Universal revenues of $11.2 billion for the first nine months of 2009 decreased
11%, or $1.4 billion, compared to the comparable period of 2008 as lower
revenues in our broadcast television business ($1.1 billion), reflecting the
lack of a current-year counterpart to the 2008 Olympics broadcasts and the
effects of lower advertising revenues, lower earnings and higher impairments
related to associated companies and investment securities ($0.6 billion) and
lower revenues in film ($0.4 billion) were partially offset by the gain relating
to AETN ($0.6 billion) and higher revenues in cable ($0.2 billion). Segment
profit of $1.7 billion decreased 27%, or $0.6 billion, as lower earnings and
higher impairments related to associated companies and investment securities
($0.6 billion), lower earnings in film ($0.4 billion), lack of current-year
counterpart to 2008 proceeds from insurance claims ($0.1 billion) and lower
earnings in our broadcast television business ($0.1 billion) were partially
offset by the gain related to AETN ($0.6 billion) and higher earnings in cable
($0.1 billion).
Capital
Finance
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
12,161
|
|
$
|
17,292
|
|
$
|
38,100
|
|
$
|
52,242
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
263
|
|
$
|
2,020
|
|
$
|
2,008
|
|
$
|
7,602
|
|
At
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
550,744
|
|
$
|
622,135
|
|
$
|
572,903
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Lending and Leasing (CLL)(a)
|
$
|
4,668
|
|
$
|
6,474
|
|
$
|
15,519
|
|
$
|
20,297
|
Consumer
(formerly GE Money)(a)
|
|
4,878
|
|
|
6,613
|
|
|
14,508
|
|
|
19,709
|
Real
Estate
|
|
982
|
|
|
1,679
|
|
|
2,970
|
|
|
5,526
|
Energy
Financial Services
|
|
483
|
|
|
1,261
|
|
|
1,617
|
|
|
3,020
|
GE
Capital Aviation Services (GECAS)
|
|
1,150
|
|
|
1,265
|
|
|
3,486
|
|
|
3,690
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
$
|
135
|
|
$
|
389
|
|
$
|
625
|
|
$
|
1,985
|
Consumer(a)
|
|
434
|
|
|
796
|
|
|
1,404
|
|
|
2,852
|
Real
Estate
|
|
(538)
|
|
|
244
|
|
|
(948)
|
|
|
1,204
|
Energy
Financial Services
|
|
41
|
|
|
306
|
|
|
181
|
|
|
606
|
GECAS
|
|
191
|
|
|
285
|
|
|
746
|
|
|
955
|
|
At
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
CLL(a)
|
$
|
213,979
|
|
$
|
247,810
|
|
$
|
228,176
|
Consumer(a)
|
|
180,070
|
|
|
213,889
|
|
|
187,927
|
Real
Estate
|
|
83,684
|
|
|
88,739
|
|
|
85,266
|
Energy
Financial Services
|
|
22,598
|
|
|
21,856
|
|
|
22,079
|
GECAS
|
|
50,413
|
|
|
49,841
|
|
|
49,455
|
|
|
|
|
|
|
|
|
|
(a)
|
During
the first quarter of 2009, we transferred Banque Artesia Nederland N.V.
(Artesia) from CLL to Consumer. Prior-period amounts were reclassified to
conform to the current-period’s
presentation.
|
Capital
Finance revenues decreased 30% and net earnings decreased 87% compared with the
third quarter of 2008. Revenues for the third quarters of 2009 and 2008 included
$0.7 billion and $0.2 billion of revenue from acquisitions, respectively, and in
2009 were reduced by $1.5 billion as a result of dispositions, including the
effect of the deconsolidation of PTL. Revenues for the quarter also decreased
$4.2 billion compared with the third quarter of 2008 as a result of organic
revenue declines, driven by a lower asset base and a lower interest rate
environment, and the stronger U.S. dollar. Net earnings decreased by $1.8
billion in the third quarter of 2009 compared with the third quarter of 2008,
primarily due to higher provisions for losses on financing receivables
associated with the challenging economic environment, partially offset by lower
selling, general and administrative costs.
Capital
Finance revenues decreased 27% and net earnings decreased 74% compared with the
first nine months of 2008. Revenues for the first nine months of 2009 and 2008
included $2.6 billion and $0.4 billion of revenue from acquisitions,
respectively, and in 2009 were reduced by $3.5 billion as a result of
dispositions, including the effect of the deconsolidation of PTL. Revenues for
the first nine months also decreased $12.8 billion compared with the first nine
months of 2008 as a result of organic revenue declines, primarily driven by a
lower asset base and a lower interest rate environment, and the stronger U.S.
dollar. Net earnings decreased by $5.6 billion in the first nine months of 2009
compared with the first nine months of 2008, primarily due to higher provisions
for losses on financing receivables associated with the challenging economic
environment, partially offset by lower selling, general and administrative
costs.
During
the first nine months of 2009, General Electric Capital Corporation (GE Capital)
provided $51 billion of new financings in the U.S. to various companies,
infrastructure projects and municipalities. Additionally, we extended $54
billion of credit to approximately 49 million U.S. consumers. GE Capital
provided credit to approximately 19,700 new commercial customers and 26,000 new
small businesses during the first nine months of 2009 in the U.S. and ended the
period with outstanding credit to more than 350,000 commercial customers and
147,000 small businesses through retail programs in the U.S.
Additional
information about certain Capital Finance businesses follows.
CLL
revenues decreased 28% and net earnings decreased 65% compared with the third
quarter of 2008. Revenues for the third quarters of 2009 and 2008 included $0.5
billion and $0.2 billion, respectively, from acquisitions, and were reduced by
$1.1 billion from dispositions, primarily related to the deconsolidation of PTL.
Revenues for the quarter also decreased $1.0 billion compared with the third
quarter of 2008 as a result of organic revenue declines ($0.8 billion) and the
stronger U.S. dollar ($0.2 billion). Net earnings decreased by $0.3 billion in
the third quarter of 2009, reflecting higher provisions for losses on financing
receivables ($0.1 billion) and declines in lower-taxed earnings from global
operations ($0.1 billion), partially offset by higher investment income ($0.1
billion) and acquisitions ($0.1 billion). Net earnings also included
mark-to-market losses and other-than-temporary impairments ($0.2 billion),
partially offset by the absence of the 2008 Genpact loss ($0.2
billion).
CLL
revenues decreased 24% and net earnings decreased 69% compared with the first
nine months of 2008. Revenues for the first nine months of 2009 and 2008
included $1.7 billion and $0.3 billion from acquisitions, respectively, and were
reduced by $2.0 billion from dispositions, primarily related to the
deconsolidation of PTL. Revenues for the first nine months of 2009 also included
$0.3 billion related to a gain on the partial sale of a limited partnership
interest in PTL and remeasurement of our retained investment. Revenues for the
first nine months decreased $4.2 billion compared with the first nine months of
2008 as a result of organic revenue declines ($3.3 billion) and the stronger
U.S. dollar ($0.9 billion). Net earnings decreased by $1.4 billion in the first
nine months of 2009, reflecting higher provisions for losses on financing
receivables ($0.6 billion), lower gains ($0.4 billion), declines in lower-taxed
earnings from global operations ($0.3 billion) and the stronger U.S. dollar (0.1
billion), partially offset by acquisitions ($0.4 billion). Net earnings also
included mark-to-market losses and other-than-temporary impairments ($0.3
billion) and the absence of the 2008 Genpact gain ($0.1 billion), partially
offset by the gain on PTL sale and remeasurement ($0.3 billion).
Consumer
revenues decreased 26% and net earnings decreased 45% compared with the third
quarter of 2008. Revenues for the third quarter of 2009 included $0.3 billion
from acquisitions and were reduced by $0.4 billion as a result of dispositions.
Revenues for the quarter decreased $1.6 billion compared with the third quarter
of 2008 as a result of organic revenue declines ($1.1 billion) and the stronger
U.S. dollar ($0.5 billion). The decrease in net earnings resulted from core
declines ($0.5 billion), partially offset by higher securitization income ($0.1
billion). Core declines primarily resulted from lower results in the U.S. and
U.K., reflecting higher provisions for losses on financing receivables ($0.4
billion) and the effects of mark-to-market losses and other-than-temporary
impairments ($0.1 billion).
Consumer
revenues decreased 26% and net earnings decreased 51% compared with the first
nine months of 2008. Revenues for the first nine months of 2009 included $0.8
billion from acquisitions (including a gain of $0.3 billion on the remeasurement
of our previously held equity investment in BAC related to the acquisition of a
controlling interest (BAC acquisition gain)) and were reduced by $1.3 billion as
a result of dispositions, and the lack of a current-year counterpart to the 2008
gain on sale of our Corporate Payment Services (CPS) business ($0.4 billion).
Revenues for the first nine months decreased $4.3 billion compared with the
first nine months of 2008 as a result of organic revenue declines ($2.5 billion)
and the stronger U.S. dollar ($1.9 billion). The decrease in net earnings
resulted primarily from core declines ($1.7 billion) and the lack of a
current-year counterpart to the 2008 gain on sale of our CPS business ($0.2
billion). These decreases were partially offset by higher securitization income
($0.2 billion) and the BAC acquisition gain ($0.2 billion). Core declines
primarily resulted from lower results in the U.S. & U.K., reflecting higher
provisions for losses on financing receivables ($1.6 billion) and the effects of
mark-to-market losses and other-than-temporary impairments ($0.2 billion),
partially offset by growth in lower-taxed earnings from global operations ($0.1
billion). The benefit from lower-taxed earnings from global operations included
$0.5 billion from the decision to indefinitely reinvest prior-year earnings
outside the U.S.
Real
Estate revenues decreased 42% and net earnings decreased 320% compared with the
third quarter of 2008. Revenues for the quarter decreased $0.7 billion compared
with the third quarter of 2008 as a result of organic revenue declines ($0.6
billion), primarily as a result of a decrease in sales of properties, and the
stronger U.S. dollar ($0.1 billion). Real Estate net earnings decreased $0.8
billion compared with the third quarter of 2008, primarily from an increase in
provisions for losses on financing receivables and impairments ($0.5 billion)
and a decrease in gains on sales of properties as compared to the prior period
($0.2 billion). Depreciation expense on real estate equity investments totaled
$0.3 billion and $0.4 billion in the third quarters of 2009 and 2008,
respectively.
Real
Estate revenues decreased 46% and net earnings decreased 179% compared with the
first nine months of 2008. Revenues for the first nine months decreased $2.6
billion compared with the first nine months of 2008 as a result of organic
revenue declines ($2.3 billion), primarily as a result of a decrease in sales of
properties, and the stronger U.S. dollar ($0.3 billion). Real Estate net
earnings decreased $2.2 billion compared with the first nine months of 2008,
primarily from a decrease in gains on sales of properties as compared to the
prior period ($1.1 billion) and an increase in provisions for losses on
financing receivables and impairments ($0.8 billion). Depreciation expense on
real estate equity investments totaled $0.9 billion in both the first nine
months of 2009 and 2008, respectively.
Energy
Financial Services revenues decreased 62% and net earnings decreased 87%
compared with the third quarter of 2008. Revenues for the quarter decreased $0.8
billion compared with the third quarter of 2008 as a result of organic declines
($0.8 billion), primarily as a result of the effects of lower energy commodity
prices and a decrease in gains on sales of assets. The decrease in net earnings
resulted primarily from core declines, including a decrease in gains on sales of
assets as compared to the prior period and the effects of lower energy commodity
prices.
Energy
Financial Services revenues decreased 46% and net earnings decreased 70%
compared with the first nine months of 2008. Revenues for the first nine months
of 2009 included $0.1 billion of gains from dispositions. Revenues for the first
nine months also decreased $1.5 billion compared with the first nine months of
2008 as a result of organic declines ($1.5 billion), primarily as a result of
the effects of lower energy commodity prices and a decrease in gains on sales of
assets. The decrease in net earnings resulted primarily from core declines,
including a decrease in gains on sales of assets as compared to the prior period
and the effects of lower energy commodity prices.
GECAS
revenues decreased 9% and net earnings decreased 33% compared with the third
quarter of 2008. The decrease in revenues resulted primarily from organic
revenue declines ($0.1 billion). The decrease in net earnings resulted primarily
from core declines ($0.1 billion) reflecting higher credit losses and
impairments.
GECAS
revenues decreased 6% and net earnings decreased 22% compared with the first
nine months of 2008. The decrease in revenues resulted primarily from lower
asset sales ($0.2 billion). The decrease in net earnings resulted primarily from
lower asset sales ($0.1 billion) and core declines ($0.1 billion) reflecting
higher credit losses and impairments.
Consumer & Industrial
revenues of $2.4 billion decreased 18%, or $0.6 billion, in the third quarter of
2009 compared with the third quarter of 2008, primarily as a result of lower
volume ($0.6 billion). The decrease in volume primarily reflected tightened
consumer spending in the U.S. and European markets. Segment profit increased
149%, or $0.1 billion, in the third quarter of 2009 as a result of lower
material and other costs ($0.1 billion) and higher prices.
Consumer
& Industrial revenues of $7.2 billion decreased 20%, or $1.8 billion, in the
first nine months of 2009 compared with the first nine months of 2008, as lower
volume ($1.8 billion) and the stronger U.S. dollar ($0.1 billion) were partially
offset by higher prices ($0.2 billion). The decrease in volume primarily
reflected tightened consumer spending in the U.S. and European markets. Segment
profit decreased 20%, or $0.1 billion, in the first nine months of 2009 as lower
productivity ($0.2 billion) and lower other income ($0.1 billion) were partially
offset by higher prices ($0.2 billion) and lower material costs ($0.1
billion).
Discontinued
Operations
|
|
Three
months ended September 30
|
|
Nine
months ended September 30
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from discontinued operations,
|
|
|
|
|
|
|
|
|
|
|
|
net
of taxes
|
$
|
40
|
|
$
|
(165)
|
|
$
|
(175)
|
|
$
|
(534)
|
Discontinued
operations comprised GE Money Japan, WMC, Plastics, Advanced Materials, GE
Insurance Solutions, GE Life, and Genworth. Results of these businesses are
reported as discontinued operations for all periods presented.
Earnings
from discontinued operations, net of taxes, for the third quarter of 2009,
primarily related to certain tax items in our discontinued insurance operations.
Loss from discontinued operations, net of taxes, for the first nine months of
2009, primarily reflected the incremental loss on disposal of GE Money Japan
($0.1 billion).
Loss
from discontinued operations, net of taxes, for the third quarter of 2008,
primarily reflected the loss from operations ($0.2 billion) at GE Money Japan.
Loss from discontinued operations, net of taxes, for the first nine months of
2008, primarily reflected loss from operations ($0.3 billion) and the estimated
incremental loss on disposal of GE Money Japan ($0.2 billion).
For
additional information related to discontinued operations, see Note 2 to the
condensed, consolidated financial statements.
Corporate items and
eliminations revenues in the third quarter of 2009 decreased by $0.7
billion due to an increase in net losses on hedging activity ($0.4 billion),
lack of a current-year counterpart to a gain on termination of a derivatives
contract in 2008 ($0.2 billion) and a decrease in gains on dispositions ($0.1
billion) partially offset by higher revenues from insurance activities ($0.1
billion). Corporate items and eliminations costs increased by $0.9 billion
compared to the third quarter of 2008 due to an increase in restructuring,
rationalization and other charges ($0.7 billion), net losses on hedging activity
($0.2 billion) and lower net gains on dispositions ($0.1 billion), partially
offset by lower losses from insurance activities ($0.1 billion).
Corporate
items and eliminations revenues in the first nine months of 2009 decreased by
$0.6 billion compared to the first nine months of 2008 due to lack of a
current-year counterpart to a gain on termination of a derivatives contract in
2008 ($0.2 billion), lower income from guaranteed investment contracts ($0.2
billion), a decrease in net gains on hedging activity ($0.1 billion) and a
decrease in gains on dispositions ($0.1 billion). Corporate items and
eliminations costs increased by $1.0 billion compared to the first nine months
of 2008 due to an increase in restructuring, rationalization and other charges
($1.1 billion) and net losses on hedging activity ($0.3 billion), partially
offset by lower corporate staff and incentive costs ($0.2 billion).
Certain
amounts included in Corporate items and eliminations cost are not allocated to
GE operating segments because they are excluded from the measurement of their
operating performance for internal purposes. In the third quarter of 2009, these
included $0.1 billion at each of Technology Infrastructure and Energy
Infrastructure, primarily for restructuring, rationalization and other charges.
In the first nine months of 2009, these included $0.3 billion at Technology
Infrastructure, $0.2 billion at Capital Finance and $0.1 billion at Energy
Infrastructure and Consumer & Industrial, primarily for restructuring,
rationalization and other charges and $0.2 billion at NBC Universal, primarily
for restructuring, rationalization and other charges and technology and product
development costs. (GECS amounts on an after-tax basis).
B.
Statement of Financial Position
Overview
of Financial Position
Major
changes in our financial position in the first nine months of 2009 resulted from
the following:
·
|
At
GECS, collections on financing receivables exceeded originations by
approximately $37 billion in the first nine months of
2009.
|
·
|
We
completed the exchange of our Consumer businesses in Austria and Finland,
the credit card and auto businesses in the U.K., and the credit card
business in Ireland for a 100% ownership interest in Interbanca S.p.A., an
Italian corporate bank;
|
·
|
In
order to improve tangible capital and reduce leverage, GE contributed $9.5
billion to GECS, of which $8.8 billion was subsequently contributed to GE
Capital;
|
·
|
The
U.S. dollar was weaker at September 30, 2009 than at December 31, 2008,
increasing the translated levels of our non-U.S. dollar assets and
liabilities;
|
·
|
We
deconsolidated PTL following our partial sale during the first quarter of
2009;
|
·
|
We
purchased a controlling interest in BAC in the second quarter of 2009;
and
|
·
|
Our
investment securities balance increased primarily as a result of purchases
and a reduction in unrealized losses due to improved credit
markets.
|
Consolidated
assets were $787.8 billion at September 30, 2009, a decrease of $9.9 billion
from December 31, 2008. GE assets increased $8.9 billion, and financial services
assets decreased $2.6 billion.
GE
assets were $207.8 billion at September 30, 2009, a $8.9 billion increase from
December 31, 2008. The increase reflects a $17.4 billion increase in investment
in GECS and a $1.4 billion increase in all other assets, partially offset by a
$6.9 billion decrease in cash and equivalents (primarily related to a $9.5
billion capital contribution to GECS during the first quarter, partially offset
by cash retained as a result of the reduction in our dividend) and a $2.2
billion decrease in current receivables.
Financial
Services assets were $658.3 billion at September 30, 2009. The $2.6 billion
decrease from December 31, 2008 was primarily attributable to decreases in net
financing receivables of $23.9 billion, assets of businesses held for sale of
$9.3 billion and property, plant and equipment – net of $5.4 billion, partially
offset by increases in cash and equivalents of $19.4 billion, investment
securities of $11.5 billion and goodwill of $2.8 billion.
Consolidated
liabilities were $662.0 billion at September 30, 2009, a $22.1 billion decrease
from December 31, 2008. GE liabilities decreased $3.6 billion, while financial
services liabilities decreased $19.7 billion.
GE
liabilities were $84.0 billion at September 30, 2009. The $3.6 billion decrease
from December 31, 2008 was primarily attributable to decreases in dividends
payable of $2.2 billion, short-term borrowings of $1.8 billion and accounts
payable of $1.3 billion, partially offset by an increase in long-term borrowings
of $1.9 billion. The ratio of borrowings to total capital invested for GE at the
end of the third quarter was 9.0% compared with 9.9% at the end of last year and
10.8% at September 30, 2008.
Financial
Services liabilities decreased $19.7 billion from year-end 2008 to
$585.7.billion reflecting decreases in all other liabilities of $11.1 billion
(primarily cash collateral received from counterparties on derivative contracts
and a reduction in taxes payable), total borrowings of $6.2 billion, investment
contracts, insurance liabilities and insurance annuity benefits of $1.4 billion,
and accounts payable of $1.4 billion, partially offset by an increase in
deferred income taxes of $0.9 billion.
Cash
Flows
Consolidated
cash and equivalents were $61.4 billion at September 30, 2009, an increase of
$13.2 billion during the first nine months of 2009. Cash and equivalents totaled
$16.3 billion at September 30, 2008, an increase of $0.6 billion during the
first nine months of 2008.
We
evaluate our cash flow performance by reviewing our industrial (non-financial
services) businesses and financial services businesses separately. Cash from
operating activities (CFOA) is the principal source of cash generation for our
industrial businesses. The industrial businesses also have liquidity available
via the public capital markets. Our financial services businesses use a variety
of financial resources to meet our capital needs. Cash for financial services
businesses is primarily provided from the issuance of term debt and commercial
paper in the public and private markets, time deposits, as well as financing
receivables collections, sales and securitizations.
GE
Cash Flow
GE cash
and equivalents were $5.2 billion at September 30, 2009, compared with $3.5
billion at September 30, 2008. GE CFOA totaled $11.5 billion for the first nine
months of 2009 compared with $13.6 billion for the first nine months of 2008.
With respect to GE CFOA, we believe that it is useful to supplement our GE
Condensed Statement of Cash Flows and to examine in a broader context the
business activities that provide and require cash.
|
Nine
months ended September 30
|
(In
billions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Operating
cash collections(a)
|
$
|
77.3
|
|
$
|
85.0
|
Operating
cash payments
|
|
(65.8)
|
|
|
(73.7)
|
Cash
dividends from GECS to GE
|
|
–
|
|
|
2.3
|
GE
cash from operating activities (GE CFOA)(a)
|
$
|
11.5
|
|
$
|
13.6
|
|
|
|
|
|
|
(a)
|
GE
sells customer receivables to GECS in part to fund the growth of our
industrial businesses. These transactions can result in cash generation or
cash use. During any given period, GE receives cash from the sale of
receivables to GECS. It also foregoes collection of cash on receivables
sold. The incremental amount of cash received from sale of receivables in
excess of the cash GE would have otherwise collected had those receivables
not been sold, represents the cash generated or used in the period
relating to this activity. The incremental cash generated in GE CFOA from
selling these receivables to GECS increased GE CFOA by $0.2 billion and
$1.3 billion in the nine months ended September 30, 2009 and 2008,
respectively. See Note 17 to the condensed, consolidated financial
statements for additional information about the elimination of
intercompany transactions between GE and
GECS.
|
The most
significant source of cash in GE CFOA is customer-related activities, the
largest of which is collecting cash following a product or services sale. GE
operating cash collections decreased by $7.7 billion during the first nine
months of 2009. This decrease is consistent with the changes in comparable GE
operating segment revenues. Analyses of operating segment revenues discussed in
the preceding Segment Operations section are the best way of understanding their
customer-related CFOA.
The most
significant operating use of cash is to pay our suppliers, employees, tax
authorities and others for a wide range of material and services. GE operating
cash payments decreased in the first nine months of 2009 by $7.9 billion,
consistent with the decrease in GE total costs and expenses.
GE CFOA
decreased $2.2 billion compared with the first nine months of 2008, primarily
reflecting the lack of a current-year dividend from GECS ($2.3
billion).
Dividends
from GECS represented the distribution of a portion of GECS retained earnings
and are distinct from cash from continuing operating activities within the
financial services businesses. The amounts included in GE CFOA are the total
dividends, including normal dividends as well as any special dividends from
excess capital, primarily resulting from GECS business sales. Beginning in the
first quarter of 2009, GECS fully suspended its normal dividend to
GE.
GECS
Cash Flow
GECS
cash and equivalents were $56.9 billion at September 30, 2009, compared with
$13.1 billion at September 30, 2008. GECS cash from operating activities totaled
$2.0 billion for the first nine months of 2009, compared with cash from
operating activities of $18.1 billion for the first nine months of 2008. This
decrease was primarily due to an overall decline in net earnings, decreases in
cash collateral held from counterparties on derivative contracts ($6.7 billion)
and declines in taxes payable ($4.7 billion).
Consistent
with our plan to reduce GECS asset levels, cash from investing activities was
$36.6 billion during the first nine months of 2009. $37.0 billion resulted from
a reduction in financing receivables, primarily from collections exceeding
originations and $8.8 billion resulted from proceeds from business dispositions,
including the consumer businesses in Austria and Finland, the credit card and
auto businesses in the U.K., the credit card business in Ireland and a portion
of our Australian residential mortgage business. These sources were partially
offset by cash used for acquisitions of $5.6 billion, primarily for the
acquisition of Interbanca S.p.A.
GECS
cash used for financing activities in the first nine months of 2009 of $19.1
billion related primarily to a $33.6 billion reduction in borrowings (maturities
90 days or less) and $1.9 billion of net redemptions of investment contracts,
partially offset by $6.8 billion of new issuances on borrowings (maturities
longer than 90 days) exceeding repayments and a capital contribution from GE to
GECS of $9.5 billion.
Intercompany
Eliminations
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividends to GE or capital contributions from GE to GECS; GE customer
receivables sold to GECS; GECS services for trade receivables management and
material procurement; buildings and equipment (including automobiles) leased by
GE from GECS; information technology (IT) and other services sold to GECS by GE;
aircraft engines manufactured by GE that are installed on aircraft purchased by
GECS from third-party producers for lease to others; medical equipment
manufactured by GE that is leased by GECS to others; and various investments,
loans and allocations of GE corporate overhead costs. See Note 17 to the
condensed, consolidated financial statements for further information related to
intercompany eliminations.
Fair
Value Measurements
We
adopted Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 820, Fair
Value Measurements and Disclosures, in two steps; effective January 1,
2008, we adopted it for all financial instruments and non-financial instruments
accounted for at fair value on a recurring basis and effective January 1, 2009,
for all non-financial instruments accounted for at fair value on a non-recurring
basis. Adoption of this did not have a material effect on our financial position
or results of operations. During the first nine months of 2009, there were no
significant changes in our methodology for measuring fair value of financial
instruments as compared to prior quarters. Additional information about our
application of this guidance is provided in Note 14 to the condensed,
consolidated financial statements.
At
September 30, 2009, the aggregate amount of investments that are measured at
fair value through earnings totaled $7.8 billion and consisted primarily of
retained interests in securitizations, equity investments, as well as various
assets held for sale in the ordinary course of business, such as credit card
receivables.
C.
Financial Services Portfolio Quality
Investment securities comprise
mainly investment-grade debt securities supporting obligations to annuitants and
policyholders in our run-off insurance operations and holders of guaranteed
investment contracts (GICs). The fair value of investment securities totaled
$52.7 billion at September 30, 2009, compared with $41.2 billion at December 31,
2008. Of the amount at September 30, 2009, we held debt securities with an
estimated fair value of $42.9 billion, which included corporate debt securities,
residential mortgage-backed securities (RMBS) and commercial mortgage-backed
securities (CMBS) with estimated fair values of $25.1 billion, $3.4 billion and
$2.5 billion, respectively. Unrealized losses on debt securities were $3.0
billion and $5.4 billion at September 30, 2009 and December 31, 2008,
respectively. This amount included unrealized losses on corporate debt
securities, RMBS and CMBS of $1.0 billion, $0.9 billion and $0.5 billion,
respectively, at September 30, 2009, as compared with $2.6 billion, $1.1 billion
and $0.8 billion, respectively, at December 31, 2008.
Of the
$3.4 billion of RMBS, our exposure to subprime credit was approximately $1.0
billion. These securities are primarily held to support obligations to holders
of GICs. A majority of these securities have received investment-grade credit
ratings from the major rating agencies. We purchased no such securities in the
first nine months of 2009 and 2008. These investment securities are
collateralized primarily by pools of individual direct mortgage loans, and do
not include structured products such as collateralized debt obligations.
Additionally, a majority of exposure to residential subprime credit related to
investment securities backed by mortgage loans originated in 2006 and
2005.
We
regularly review investment securities for impairment. Our review uses both
qualitative and quantitative criteria. Effective April 1, 2009, the FASB amended
FASB ASC 320 and modified the requirements for recognizing and measuring
other-than-temporary impairment for debt securities. This did not have a
material impact on our results of operations. We presently do not intend to sell
our debt securities and believe that it is not more likely than not that we will
be required to sell these securities that are in an unrealized loss position
before recovery of our amortized cost. If we do not intend to sell the security
and it is not more likely than not that we will be required to sell the security
before recovery of our amortized cost, we evaluate other qualitative criteria to
determine whether a credit loss exists, such as the financial health of and
specific prospects for the issuer, including whether the issuer is in compliance
with the terms and covenants of the security. Quantitative criteria include
determining whether there has been an adverse change in expected future cash
flows. With respect to corporate bonds we placed greater emphasis on the credit
quality of the issuer. With respect to RMBS and CMBS, we placed greater emphasis
on our expectations with respect to cash flows from the underlying collateral
and with respect to RMBS, we considered other features of the security,
principally monoline insurance. For equity securities, our criteria include the
length of time and magnitude of the amount that each security is in an
unrealized loss position. Our other-than-temporary impairment reviews involve
our finance, risk and asset management functions as well as the portfolio
management and research capabilities of our internal and third-party asset
managers.
Monoline
insurers (Monolines) provide credit enhancement for certain of our investment
securities. The credit enhancement is a feature of each specific security that
guarantees the payment of all contractual cash flows, and is not purchased
separately by GE. At September 30, 2009, our investment securities insured by
Monolines totaled $2.7 billion, including $0.8 billion of our $1.0 billion
investment in subprime RMBS. The Monoline industry continues to experience
financial stress from increasing delinquencies and defaults on the individual
loans underlying insured securities. In evaluating whether a security with
Monoline credit enhancement is other-than-temporarily impaired, we first
evaluate whether there has been an adverse change in estimated cash flows. If
there has been an adverse change in estimated cash flows, we then evaluate the
overall credit worthiness of the Monoline using an analysis that is similar to
the approach we use for corporate bonds. This includes an evaluation of the
following factors: sufficiency of the Monoline’s cash reserves and capital,
ratings activity, whether the Monoline is in default or default appears
imminent, and the potential for intervention by an insurance or other regulator.
At September 30, 2009, the unrealized loss associated with securities subject to
Monoline credit enhancement for which there is an expected loss was $0.5
billion, of which $0.3 billion relates to expected credit losses and the
remaining $0.2 billion relates to other market factors.
Total
pre-tax other-than-temporary impairment losses during the three months ended
September 30, 2009 were $0.3 billion of which, $0.2 billion was recognized in
earnings and primarily relates to credit losses on RMBS, corporate debt
securities and retained interests in our securitization arrangements, and $0.2
billion primarily relates to non-credit related losses on RMBS and is included
within accumulated other comprehensive income.
Our
qualitative review attempts to identify issuers’ securities that are “at-risk”
of other-than-temporary impairment, that is, for securities that we do not
intend to sell and it is not more likely than not that we will be required to
sell before recovery of our amortized cost, whether there is a possibility of
credit loss that would result in an other-than-temporary impairment recognition
in the following 12 months. Securities we have identified as “at-risk” primarily
relate to investments in RMBS securities and corporate debt securities across a
broad range of industries. The amount of associated unrealized loss on these
securities at September 30, 2009 is $0.8 billion. Credit losses that would be
recognized in earnings are calculated when we determine the security to be
other-than-temporarily impaired. Continued uncertainty in the capital markets
may cause increased levels of other-than-temporary impairments.
At
September 30, 2009, unrealized losses on investment securities totaled $3.1
billion, including $2.8 billion aged 12 months or longer, compared with
unrealized losses of $5.7 billion, including $3.5 billion aged 12 months or
longer, at December 31, 2008. Of the amount aged 12 months or longer at
September 30, 2009, more than 70% of our debt securities were considered to be
investment-grade by the major rating agencies. In addition, of the amount aged
12 months or longer, $1.8 billion and $0.9 billion related to structured
securities (mortgage-backed, asset-backed and securitization retained interests)
and corporate debt securities, respectively. With respect to our investment
securities that are in an unrealized loss position at September 30, 2009, the
vast majority relate to debt securities held to support obligations to
annuitants and policyholders in our run-off insurance operations and holders of
GICs. We presently do not intend to sell our debt securities and believe that it
is not more likely than not that we will be required to sell these securities
that are in an unrealized loss position before recovery of our amortized cost.
The fair values used to determine these unrealized gains and losses are those
defined by relevant accounting standards and are not a forecast of future gains
or losses. For additional information, see Note 3 to the condensed,
consolidated financial statements.
Financing receivables is our
largest category of assets and represents one of our primary sources of
revenues. A discussion of the quality of certain elements of the financing
receivables portfolio follows. For purposes of that discussion, “delinquent”
receivables are those that are 30 days or more past due based on their
contractual terms; and “nonearning” receivables are those that are 90 days or
more past due (or for which collection has otherwise become doubtful).
Nonearning receivables exclude loans purchased at a discount (unless they have
deteriorated post acquisition). Under FASB ASC 310, these loans are initially
recorded at fair value and accrete interest income over the estimated life of
the loan based on reasonably estimable cash flows even if the underlying loans
are contractually delinquent at acquisition. In addition, nonearning receivables
exclude loans which are paying currently under a cash accounting basis, but
classified as impaired.
Our
portfolio of financing receivables is diverse and not directly comparable to
major U.S. banks. Historically, we have had less consumer exposure, which over
time has had higher loss rates than commercial exposure. Our consumer exposure
is largely non-U.S. and primarily comprises mortgage, sales finance, auto and
personal loans in various European and Asian countries. Our U.S. consumer
financing receivables comprise 7% of our total portfolio. Of those,
approximately 35% relate primarily to credit cards, which are often subject to
profit and loss sharing arrangements with the retailer (the results of which are
reflected in GECS revenues), and have a smaller average balance and lower loss
severity as compared to bank cards. The remaining 65% are sales finance
receivables, which provide electronics, recreation, medical and home improvement
financing to customers. In 2007, we exited the U.S. mortgage business and we
have no U.S. auto or student loans.
Our
commercial portfolio primarily comprises senior, secured positions with
comparatively low loss history. The secured receivables in this portfolio are
collateralized by a variety of asset classes, including industrial-related
facilities and equipment; commercial and residential real estate; vehicles,
aircraft, and equipment used in many industries, including the construction,
manufacturing, transportation, telecommunications and healthcare industries.
Substantially all of this portfolio is secured.
Losses
on financing receivables are recognized when they are incurred, which requires
us to make our best estimate of probable losses inherent in the portfolio. Such
estimate requires consideration of historical loss experience, adjusted for
current conditions, and judgments about the probable effects of relevant
observable data, including present economic conditions such as delinquency
rates, financial health of specific customers and market sectors, collateral
values (including housing price indices as applicable), and the present and
expected future levels of interest rates. Our risk management process includes
standards and policies for reviewing major risk exposures and concentrations,
and evaluates relevant data either for individual loans or financing leases, or
on a portfolio basis, as appropriate. Effective January 1, 2009, loans acquired
in a business acquisition are recorded at fair value, which incorporates our
estimate at the acquisition date of the credit losses over the remaining life of
the portfolio. As a result, the allowance for loan losses is not carried over at
acquisition. This may result in lower reserve coverage ratios
prospectively.
|
Financing
receivables at
|
|
Nonearning
receivables at
|
|
Allowance
for losses at
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
92,263
|
|
$
|
105,410
|
|
$
|
3,471
|
|
$
|
1,974
|
|
$
|
1,098
|
|
$
|
843
|
Europe
|
|
40,383
|
|
|
37,767
|
|
|
1,240
|
|
|
345
|
|
|
500
|
|
|
288
|
Asia
|
|
14,096
|
|
|
16,683
|
|
|
594
|
|
|
306
|
|
|
242
|
|
|
163
|
Other
|
|
776
|
|
|
786
|
|
|
14
|
|
|
2
|
|
|
6
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages(b)
|
|
61,308
|
|
|
60,753
|
|
|
4,768
|
|
|
3,321
|
|
|
975
|
|
|
383
|
Non-U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
25,197
|
|
|
24,441
|
|
|
450
|
|
|
413
|
|
|
1,113
|
|
|
1,051
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
22,324
|
|
|
27,645
|
|
|
749
|
|
|
758
|
|
|
1,568
|
|
|
1,700
|
Non-U.S.
auto
|
|
14,366
|
|
|
18,168
|
|
|
75
|
|
|
83
|
|
|
301
|
|
|
222
|
Other
|
|
13,191
|
|
|
11,541
|
|
|
477
|
|
|
175
|
|
|
279
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate(c)
|
|
45,471
|
|
|
46,735
|
|
|
1,320
|
|
|
194
|
|
|
1,028
|
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial Services
|
|
8,362
|
|
|
8,392
|
|
|
360
|
|
|
241
|
|
|
101
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
15,046
|
|
|
15,429
|
|
|
211
|
|
|
146
|
|
|
126
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other(d)
|
|
3,095
|
|
|
4,031
|
|
|
78
|
|
|
38
|
|
|
23
|
|
|
28
|
Total
|
$
|
355,878
|
|
$
|
377,781
|
|
$
|
13,807
|
|
$
|
7,996
|
|
$
|
7,360
|
|
$
|
5,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
During
the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
|
(b)
|
At
September 30, 2009, net of credit insurance, approximately 25% of this
portfolio comprised loans with introductory, below market rates that are
scheduled to adjust at future dates; with high loan-to-value ratios at
inception; whose terms permitted interest-only payments; or whose terms
resulted in negative amortization. At origination, we underwrite loans
with an adjustable rate to the reset value. 83% of these loans are in our
U.K. and France portfolios, which comprise mainly loans with interest-only
payments and introductory below market rates, have a delinquency rate of
18.4% and have loan-to-value ratio at origination of 74%. At September 30,
2009, 3% (based on dollar values) of these loans in our U.K. and France
portfolios have been restructured.
|
(c)
|
Financing
receivables included $690 million and $731 million of construction loans
at September 30, 2009 and December 31, 2008,
respectively.
|
(d)
|
Consisted
of loans and financing leases related to certain consolidated, liquidating
securitization entities.
|
|
|
|
Allowance
for losses as
|
|
Allowance
for losses as a
|
|
|
Nonearning
receivables as a
|
|
a
percent of nonearning
|
|
percent
of total financing
|
|
|
percent
of financing receivables
|
|
receivables
|
|
receivables
|
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
3.8
|
%
|
|
1.9
|
%
|
|
31.6
|
%
|
|
42.7
|
%
|
|
1.2
|
%
|
|
0.8
|
%
|
Europe
|
|
3.1
|
|
|
0.9
|
|
|
40.3
|
|
|
83.5
|
|
|
1.2
|
|
|
0.8
|
|
Asia
|
|
4.2
|
|
|
1.8
|
|
|
40.7
|
|
|
53.3
|
|
|
1.7
|
|
|
1.0
|
|
Other
|
|
1.8
|
|
|
0.3
|
|
|
42.9
|
|
|
100.0
|
|
|
0.8
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
7.8
|
|
|
5.5
|
|
|
20.4
|
|
|
11.5
|
|
|
1.6
|
|
|
0.6
|
|
Non-U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
1.8
|
|
|
1.7
|
|
|
247.3
|
|
|
254.5
|
|
|
4.4
|
|
|
4.3
|
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
3.4
|
|
|
2.7
|
|
|
209.3
|
|
|
224.3
|
|
|
7.0
|
|
|
6.1
|
|
Non-U.S.
auto
|
|
0.5
|
|
|
0.5
|
|
|
401.3
|
|
|
267.5
|
|
|
2.1
|
|
|
1.2
|
|
Other
|
|
3.6
|
|
|
1.5
|
|
|
58.5
|
|
|
129.1
|
|
|
2.1
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
2.9
|
|
|
0.4
|
|
|
77.9
|
|
|
155.2
|
|
|
2.3
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial Services
|
|
4.3
|
|
|
2.9
|
|
|
28.1
|
|
|
24.1
|
|
|
1.2
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
1.4
|
|
|
0.9
|
|
|
59.7
|
|
|
41.1
|
|
|
0.8
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
2.5
|
|
|
0.9
|
|
|
29.5
|
|
|
73.7
|
|
|
0.7
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
3.9
|
|
|
2.1
|
|
|
53.3
|
|
|
66.6
|
|
|
2.1
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
During
the first quarter of 2009, we transferred Artesia from CLL to Consumer.
Prior-period amounts were reclassified to conform to the current-period’s
presentation.
|
Further
information on the determination of the allowance for losses on financing
receivables is provided in the Critical Accounting Estimates section in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and Note 1 to the consolidated financial statements in our Annual
Report on Form 10-K for the year ended December 31, 2008.
The
portfolio of financing receivables, before allowance for losses, was $355.9
billion at September 30, 2009, and $377.8 billion at December 31, 2008.
Financing receivables, before allowance for losses, decreased $21.9 billion from
December 31, 2008, primarily as a result of core declines of $43.4 billion
mainly from collections exceeding originations ($37.0 billion) (which includes
securitization and sales), partially offset by the weaker U.S. dollar ($16.7
billion) and acquisitions ($11.9 billion).
Related
nonearning receivables totaled $13.8 billion (3.9% of outstanding receivables)
at September 30, 2009, compared with $8.0 billion (2.1% of outstanding
receivables) at December 31, 2008. Nonearning receivables increased from
December 31, 2008, primarily in connection with the challenging global economic
environment, increased deterioration in the real estate markets and rising
unemployment.
The
allowance for losses at September 30, 2009, totaled $7.4 billion compared with
$5.3 billion at December 31, 2008, representing our best estimate of probable
losses inherent in the portfolio and reflecting the then current credit and
economic environment. Allowance for losses increased $2.1 billion from December
31, 2008, primarily due to increasing delinquencies and nonearning receivables,
reflecting the continued weakened economic and credit environment.
“Impaired”
loans in the table below are defined as larger balance or restructured loans for
which it is probable that the lender will be unable to collect all amounts due
according to original contractual terms of the loan agreement. The
vast majority of our consumer and a portion of our CLL nonearning receivables
are excluded from this definition, as they represent smaller balance homogenous
loans that we evaluate collectively by portfolio for impairment.
Impaired
loans include nonearning receivables on larger balance or restructured loans,
loans which are currently paying interest under the cash basis (but are excluded
from the nonearning category), and loans paying currently but which have been
previously restructured.
Specific
reserves are recorded for individually impaired loans to the extent we judge
principal to be uncollectible. Certain loans classified as impaired may not
require a reserve. In these circumstances, we believe that we will ultimately
collect the unpaid balance (through collection or collateral
repossession).
Further
information pertaining to loans classified as impaired and specific reserves is
included in the table below.
|
At
|
|
September
30,
|
|
December
31,
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
Loans
requiring allowance for losses
|
$
|
8,842
|
|
$
|
2,712
|
Loans
expected to be fully recoverable
|
|
3,218
|
|
|
871
|
Total
impaired loans
|
$
|
12,060
|
|
$
|
3,583
|
|
|
|
|
|
|
Allowance
for losses (specific reserves)
|
$
|
1,874
|
|
$
|
635
|
Average
investment during the period
|
|
7,463
|
|
|
2,064
|
Interest
income earned while impaired(a)
|
|
133
|
|
|
48
|
|
|
|
|
|
|
(a)
|
Recognized
principally on cash basis.
|
Impaired
loans increased by $8.5 billion from December 31, 2008 to September 30, 2009
primarily relating to increases at Real Estate ($5.4 billion) and CLL ($2.2
billion). Impaired loans increased by $4.0 billion from June 30, 2009 to
September 30, 2009, primarily relating to increases at Real Estate ($2.9
billion) and CLL ($0.7 billion). The increase in impaired loans and related
specific reserves in Real Estate reflects our current estimate of collateral
values of the underlying properties, and our estimate of loans which are not
past due, but for which it is probable that we will be unable to collect the
full principal balance at maturity due to a decline in the underlying value of
the collateral. Of our $6.2 billion impaired loans at Real Estate at September
30, 2009, approximately $4 billion are currently paying in accordance with the
contractual terms of the loan. Impaired loans at CLL primarily represent senior
secured lending positions.
CLL − Americas. Nonearning
receivables of $3.5 billion represented 25.1% of total nonearning receivables at
September 30, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 42.7% at December 31, 2008, to 31.6% at September 30,
2009, primarily from an increase in secured exposures requiring relatively lower
specific reserve levels, based upon the strength of the underlying collateral
values. The ratio of nonearning receivables as a percent of financing
receivables increased from 1.9% at December 31, 2008, to 3.8% at September 30,
2009, primarily from an increase in nonearning receivables in our senior secured
lending portfolio concentrated in the following industries: media,
communications, corporate aircraft, auto, transportation, retail/publishing,
inventory finance, and franchise finance.
CLL – Europe. Nonearning
receivables of $1.2 billion represented 9.0% of total nonearning receivables at
September 30, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 83.5% at December 31, 2008, to 40.3% at September 30,
2009, primarily from the increase in nonearning receivables related to the
acquisition of Interbanca S.p.A. The ratio of nonearning receivables as a
percent of financing receivables increased from 0.9% at December 31, 2008, to
3.1% at September 30, 2009, primarily from the increase in nonearning
receivables related to the acquisition of Interbanca S.p.A. and an increase in
nonearning receivables in secured lending in the automotive industry, partially
offset by the effect of the increase in financing receivables from the
acquisition of Interbanca S.p.A. in the first quarter of 2009. Excluding the
effects of the Interbanca S.p.A. acquisition, the ratio of allowance for losses
as a percent of financing receivables would have been 1.5%.
CLL – Asia. Nonearning
receivables of $0.6 billion represented 4.3% of total nonearning receivables at
September 30, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 53.3% at December 31, 2008, to 40.7% at September 30,
2009, primarily due to an increase in nonearning receivables in secured
exposures which did not require significant specific reserves based upon the
strength of the underlying collateral values. The ratio of nonearning
receivables as a percent of financing receivables increased from 1.8% at
December 31, 2008, to 4.2% at September 30, 2009, primarily from an increase in
nonearning receivables at our corporate asset-based, distribution finance
and corporate air secured financing businesses in Japan, Australia, New Zealand
and India and a lower financing receivables balance.
Consumer − Non-U.S. residential
mortgages. Nonearning receivables of $4.8 billion represented 34.5% of
total nonearning receivables at September 30, 2009. The ratio of allowance for
losses as a percent of nonearning receivables increased from 11.5% at December
31, 2008, to 20.4% at September 30, 2009. In the first nine months of 2009, our
nonearning receivables increased primarily as a result of the continued decline
in the U.K. housing market, partially offset by increased foreclosures. Our
non-U.S. mortgage portfolio has a loan-to-value ratio of approximately 75% at
origination and the vast majority are first lien positions. Our U.K. and France
portfolios, which comprise a majority of our total mortgage portfolio, have
reindexed loan-to-value ratios of 85% and 67%, respectively. Less than 5% of
these loans are without mortgage insurance and have a reindexed loan-to-value
equal to or greater than 100%. Loan-to-value information is updated on a
quarterly basis for a majority of our loans and considers economic factors such
as the housing price index. At September 30, 2009, we had in repossession stock
approximately 2,000 houses in the U.K. which had a value of approximately $0.3
billion.
Consumer − Non-U.S. installment and
revolving credit. Nonearning receivables of $0.5 billion represented 3.3%
of total nonearning receivables at September 30, 2009. The ratio of allowance
for losses as a percent of nonearning receivables declined from 254.5% at
December 31, 2008, to 247.3% at September 30, 2009, reflecting the effects of
loan repayments and reduced originations. Allowance for losses as a percent
of financing receivables increased from 4.3% at December 31, 2008, to 4.4%
at September 30, 2009, as increases in allowance for losses, driven by the
effects of increased delinquencies in Western Europe and Australia, were
partially offset by the effects of reclassifying assets into held for
sale.
Consumer − U.S. installment and
revolving credit. Nonearning receivables of $0.7 billion represented 5.4%
of total nonearning receivables at September 30, 2009. The ratio of allowance
for losses as a percent of nonearning receivables declined from 224.3% at
December 31, 2008, to 209.3% at September 30, 2009, as increases in the
allowance due to the effects of the continued deterioration in our U.S.
portfolio in connection with rising unemployment were more than offset by the
effects of better entry rates and improved late stage collection
effectiveness.
Real Estate. Nonearning
receivables of $1.3 billion represented 9.6% of total nonearning receivables at
September 30, 2009. The $1.1 billion increase in nonearning receivables from
December 31, 2008 was driven primarily by increased delinquencies in the U.S.
apartment and office loan portfolios, which have been adversely affected by rent
and occupancy declines. The ratio of allowance for losses as a percent of total
financing receivables increased from 0.6% at December 31, 2008, to 2.3% at
September 30, 2009, driven primarily by continued economic deterioration in the
U.S. and the U.K. markets which resulted in an increase in specific provisions.
The ratio of allowance for losses as a percent of nonearning receivables
declined from 155.2% at December 31, 2008, to 77.9% at September 30, 2009,
reflecting a higher proportion of the allowance being attributable to specific
reserves and our estimate of underlying collateral values. At September 30,
2009, real estate held for investment included $0.7 billion representing 68
foreclosed commercial real estate properties.
Delinquency
rates on managed equipment financing loans and leases and managed consumer
financing receivables follow.
|
Delinquency
rates at
|
|
|
September
30,
|
|
December
31,
|
|
September
30,
|
|
|
2009(a)
|
|
2008
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
Financing
|
|
3.01
|
%
|
|
2.17
|
%
|
|
1.61
|
%
|
Consumer
|
|
8.80
|
|
|
7.43
|
|
|
6.38
|
|
U.S.
|
|
7.31
|
|
|
7.14
|
|
|
6.17
|
|
Non-U.S.
|
|
9.42
|
|
|
7.57
|
|
|
6.47
|
|
|
|
|
|
|
|
|
|
|
|
Delinquency
rates on equipment financing loans and leases increased from December 31, 2008
and September 30, 2008, to September 30, 2009, as a result of the continuing
weakness in the global economic and credit environment. In addition, delinquency
rates on equipment financing loans and leases increased six basis points from
September 30, 2008 to September 30, 2009, as a result of the inclusion of the
CitiCapital acquisition. The challenging credit environment may continue to lead
to a higher level of commercial delinquencies and provisions for financing
receivables and could adversely affect results of operations at
CLL.
Delinquency
rates on consumer financing receivables increased from December 31, 2008 and
September 30, 2008, to September 30, 2009, primarily because of rising
unemployment, a challenging economic environment and lower volume. In response,
we continued to tighten underwriting standards globally, increased focus on
collection effectiveness and will continue the process of regularly reviewing
and adjusting reserve levels. We expect the global environment, along with U.S.
unemployment levels, to continue to deteriorate in 2009, which may result in
higher provisions for loan losses and could adversely affect results of
operations at Consumer. At September 30, 2009, roughly 43% of our U.S.-managed
portfolio, which consisted of credit cards, installment and revolving loans, was
receivable from subprime borrowers. We had no U.S. subprime residential mortgage
loans at September 30, 2009. See Note 5 to the condensed, consolidated financial
statements.
All other assets comprise
mainly real estate equity investments, equity and cost method investments,
derivative instruments and assets held for sale. All other assets totaled $87.9
billion at September 30, 2009, including a $6.0 billion equity method investment
in PTL following our partial sale during the first quarter of 2009, compared
with $85.7 billion at December 31, 2008. During the first nine months of 2009,
we recognized other-than-temporary impairments of cost and equity method
investments of $0.5 billion. Of the amount at September 30, 2009, we had cost
method investments totaling $2.2 billion. The fair value of and unrealized loss
on cost method investments in a continuous unrealized loss position for less
than 12 months at September 30, 2009, were $0.6 billion and $0.1 billion,
respectively. The fair value of and unrealized loss on cost method investments
in a continuous unrealized loss position for 12 months or more at September 30,
2009, were $0.1 billion and insignificant, respectively.
Included
in other assets are Real Estate equity investments of $32.9 billion and $32.8
billion at September 30, 2009 and December 31, 2008, respectively. Our portfolio
is diversified, both geographically and by asset type. However, the global real
estate market is subject to periodic cycles that can cause significant
fluctuations in market value. Over the past several months, these markets have
been increasingly affected by rising unemployment, a slowdown in general
business activity and continued challenging conditions in the credit markets. We
expect these markets will continue to be affected while the economic environment
remains challenging.
We
review the estimated values of our real estate investments semi-annually. At
December 31, 2008, the carrying value of our Real Estate investments exceeded
the estimated value by about $4 billion. For additional information, see page 55
of Management’s Discussion and Analysis of Financial Condition and Results of
Operations in our 2008 Form 10-K. During the second quarter, we updated our
review and determined that the carrying value of our Real Estate investments
exceeded estimated value by about $5 billion at June 30, 2009 due to a decline
in the Eurozone macroeconomic forecast. Given the current and expected
challenging market conditions, there continues to be risk and uncertainty
surrounding commercial real estate values and our unrealized loss on real estate
equity properties may continue to increase. Declines in estimated value of real
estate below carrying amount result in impairment losses when the aggregate
undiscounted cash flow estimates used in the estimated value measurement are
below the carrying amount. As such, estimated losses in the portfolio will not
necessarily result in recognized impairment losses. When we recognize an
impairment, the impairment is measured based upon the fair value of the
underlying asset which is based upon current market data, including current
capitalization rates. During the first nine months of 2009, Real Estate
recognized pre-tax impairments of $0.5 billion on its real estate investments,
compared with $0.1 billion for the comparable period in 2008. Continued
deterioration in economic and market conditions may result in further
impairments being recognized.
D.
Liquidity and Borrowings
We
manage our liquidity to help ensure access to sufficient funding at acceptable
costs to meet our business needs and financial obligations throughout business
cycles. Our obligations include principal payments on outstanding borrowings,
interest on borrowings, purchase obligations for inventory and equipment and
general obligations such as collateral deposits held or collateral required to
be posted to counterparties, payroll and general expenses. We rely on cash
generated through our operating activities as well as unsecured and secured
funding sources, including commercial paper, term debt, bank deposits, bank
borrowings, securitization and other retail funding products.
Sources
for payment of our obligations are determined through our annual financial and
strategic planning processes. Our 2009 funding plan anticipates repayment of
principal on outstanding short-term borrowings ($194 billion at December 31,
2008) through commercial paper issuances; long-term debt issuances; collections
of financing receivables exceeding originations; cash on hand; and deposit
funding and alternative sources of funding.
Interest
on borrowings is primarily funded through interest earned on existing financing
receivables. During the first nine months of 2009, we earned interest income on
financing receivables of $17.6 billion, which more than offset interest expense
of $13.7 billion. Purchase obligations and other general obligations are funded
through customer sales revenues (industrial) or collection of principal on our
existing portfolio of loans and leases (financial services), cash on hand and
operating cash flow.
Over the
past 18 months, the global credit markets have experienced significant
volatility, which has affected both the availability and cost of our funding
sources. Throughout this period of volatility, we have been able to continue to
meet our funding needs at acceptable costs and we continue to access the
commercial paper markets without interruption.
Recent
Liquidity Actions
We
maintain a strong focus on our liquidity. Recent actions to strengthen and
maintain liquidity included:
·
|
Our
cash and equivalents were $61.4 billion at September 30, 2009 and
committed credit lines were $52.3 billion. We intend to maintain committed
credit lines and cash in excess of GECS commercial paper borrowings going
forward;
|
·
|
GECS
commercial paper borrowings were $50 billion at September 30, 2009,
compared with $72 billion at December 31,
2008;
|
·
|
We
have completed our funding related to our long-term debt funding target of
$45 billion for 2009 and have issued $35 billion of our targeted long-term
debt funding for 2010;
|
·
|
During
the first nine months of 2009, we have issued an aggregate of $20.0
billion of long-term debt (including $10.9 billion in the third quarter)
that is not guaranteed under the Federal Deposit Insurance Corporation’s
(FDIC) Temporary Liquidity Guarantee Program
(TLGP);
|
·
|
At
GECS, we are managing collections versus originations to help support
liquidity needs. In the first nine months of 2009, collections have
exceeded originations by approximately $37
billion;
|
·
|
As
of September 30, 2009, we had issued notes from our securitization
platforms in an aggregate amount of $10.7 billion. $3.8 billion of these
notes were eligible collateral under the Federal Reserve Bank of New
York’s Term Asset-Backed Securities Loan Facility (TALF). Depending on
market conditions and terms, we may securitize additional credit card
assets, floorplan and equipment receivables, and commercial mortgage
loans, including transactions for which investors can access
TALF;
|
·
|
In
February 2009, we announced the reduction of the quarterly GE stock
dividend by 68% from $0.31 per share to $0.10 per share, effective with
the second quarter dividend, which was payable in the third quarter. This
reduction has the effect of saving the company approximately $4 billion in
the second half of 2009 and will save approximately $9 billion annually
thereafter;
|
·
|
In
September 2008, we reduced the GECS dividend to GE and suspended our stock
repurchase program. Effective January 2009, we fully suspended the GECS
dividend to GE;
|
·
|
In
October 2008, we raised $15 billion in cash through common and preferred
stock offerings and we contributed $15 billion to GECS, including $9.5
billion in the first quarter of 2009 (of which $8.8 billion was further
contributed to GE Capital through capital contribution and share
issuance), in order to improve tangible capital and reduce leverage. We do
not anticipate additional contributions in 2009;
and
|
·
|
We
registered in October 2008 to use the Federal Reserve’s Commercial Paper
Funding Facility (CPFF) for up to $98 billion. Although we do not
anticipate further utilization of the CPFF, it remains available until
February 1, 2010.
|
Cash
and Equivalents
Our cash
and equivalents were $61.4 billion at September 30, 2009. We anticipate that we
will continue to generate cash from operating activities in the future, which is
available to help meet our liquidity needs. We also generate substantial cash
from the principal collections of loans and rentals from leased assets, which
historically has been invested in asset growth.
We have
committed, unused credit lines totaling $52.3 billion that had been extended to
us by 59 financial institutions at September 30, 2009. These lines include $36.6
billion of revolving credit agreements under which we can borrow funds for
periods exceeding one year. Additionally, $14.1 billion are 364-day lines that
contain a term-out feature that allows us to extend borrowings for one year from
the date of expiration of the lending agreement.
Funding
Plan
Our 2009
funding plan anticipates approximately $45 billion of senior, unsecured
long-term debt issuance, $13.4 billion of which was pre-funded in December 2008.
In the first nine months of 2009, we completed issuances of $42.0 billion of
long-term debt under the TLGP and $20.0 billion in non-guaranteed senior,
unsecured debt with maturities up to 30 years. Subsequent to the end of the
third quarter, we issued an additional $4.6 billion of long-term debt under the
TLGP. We have completed our anticipated 2009 long-term debt funding plan and
have pre-funded $35 billion of our 2010 long-term debt funding target of $35 to
$40 billion.
Under
the TLGP, the FDIC guaranteed certain senior, unsecured debt issued on or before
October 31, 2009. Our total senior, unsecured long-term debt issuance under the
program was $60 billion (including $4.6 billion issued in October
2009).
During
the fourth quarter of 2008, GECS issued commercial paper into the CPFF. The last
tranche of this commercial paper matured in February 2009.
We have
incurred $2.3 billion of fees for our participation in the TLGP and CPFF
programs through September 30, 2009. These fees are amortized over the terms of
the related borrowings.
We
maintain securitization capability in most of the asset classes we have
traditionally securitized. However, in 2008 and 2009 these capabilities have
been, and continue to be, more limited than in 2007. We have continued to
execute new securitizations throughout this period using bank administered
commercial paper conduits, and more recently have executed new securitizations
in both the public term markets and in the private markets. In the nine months
ended September 30, 2009, we have completed issuances from these platforms in an
aggregate amount of $10.7 billion. $3.8 billion of these issuances were eligible
collateral under TALF. Depending on market conditions and terms, we may
securitize additional credit card assets, floorplan and equipment receivables,
and commercial mortgage loans, including transactions for which investors can
access TALF. Total proceeds, including sales to revolving facilities, from our
securitizations were $18.5 billion and $52.7 billion during the three months and
nine months ended September 30, 2009, respectively. Comparable amounts for 2008
were $18.8 billion and $61.5 billion, for the three months and nine months,
respectively.
We have
deposit-taking capability at 17 banks outside of the U.S. and two banks in the
U.S. – GE Money Bank, Inc., a Federal Savings Bank (FSB), and GE Capital
Financial Inc., an industrial bank (IB). The FSB and IB currently issue
certificates of deposit (CDs) distributed by brokers in maturity terms from
three months to ten years. Bank deposits, which are a large component of our
alternative funding, were $36.8 billion at September 30, 2009, including CDs of
$15.2 billion. Total alternative funding decreased from $54.9 billion to $51.9
billion during the first nine months of 2009, primarily resulting from a
reduction in bank borrowings and CD balances due to the timing of asset
origination at the banks. This decline was more than offset by collections on
financing receivables exceeding originations by approximately $37 billion in the
first nine months of 2009.
As we
have been able to continue to successfully access the non-guaranteed debt
markets and have completed our anticipated 2009 long-term debt funding plan and
have pre-funded $35 billion of our 2010 long-term debt funding target of $35 to
$40 billion, we currently expect that the expiration of the TLGP will not have a
significant effect on our liquidity. If, however, the recent
disruption in the credit markets were to return or if the challenging market
conditions continue, our ability to issue unsecured long-term debt may be
affected. In the event we cannot sufficiently access our normal sources of
funding as a result of the ongoing credit market turmoil, we have a number of
alternative means to enhance liquidity, including:
·
|
Controlling
new originations in GE Capital to reduce capital and funding
requirements;
|
·
|
Using
part of our available cash balance;
|
·
|
Pursuing
alternative funding sources, including deposits and asset-backed
fundings;
|
·
|
Using
our bank credit lines which, with our cash, we intend to maintain in
excess of our outstanding commercial
paper;
|
·
|
Generating
additional cash from industrial operations;
and
|
·
|
Contributing
additional capital from GE to GE Capital, including from funds retained as
a result of the reduction in our dividend announced in February 2009 or
future dividend reductions.
|
We
believe that our existing funds, combined with our alternative means to enhance
liquidity, provide us with adequate liquidity to manage through the current
credit cycle.
Credit
Ratings
The
major debt rating agencies routinely evaluate our debt. This evaluation is based
on a number of factors, which include financial strength as well as transparency
with rating agencies and timeliness of financial reporting. On March 12,
2009, Standard & Poor’s (S&P) downgraded GE and GE Capital’s long-term
rating by one notch from “AAA” to “AA+” and, at the same time, revised the
outlook from negative to stable. Under S&P’s definitions, an obligation
rated “AAA” has the highest rating assigned by S&P. The obligor's capacity
to meet its financial commitment on the obligation is extremely strong. An
obligation rated “AA” differs from an obligation rated “AAA” only to a small
degree in that the obligor's capacity to meet its financial commitment on the
obligation is very strong. An S&P rating outlook assesses the potential
direction of a long-term credit rating over the intermediate term. In
determining a rating outlook, consideration is given to any changes in the
economic and/or fundamental business conditions. Stable means that a rating is
not likely to change in the next six months to two years.
On March
23, 2009, Moody’s Investors Service (Moody’s) downgraded GE and GE Capital’s
long-term rating by two notches from “Aaa” to “Aa2” with a stable outlook and
removed us from review for possible downgrade. Under Moody’s definitions,
obligations rated “Aaa” are judged to be of the highest quality, with minimal
credit risk. Obligations rated “Aa” are judged to be of high quality and are
subject to very low credit risk.
The
short-term ratings of “A-1+/P-1” were affirmed by both rating agencies at the
same time with respect to GE, GE Capital Services and GE Capital.
We do
not believe that the downgrades by S&P and Moody’s have had, or will have, a
material impact on our cost of funding or liquidity as the downgrades had been
widely anticipated in the market and were already reflected in the spreads on
our debt.
Ratio
of Earnings to Fixed Charges
As set
forth in Exhibit 99(b) hereto, GE Capital’s ratio of earnings to fixed charges
declined to 0.88:1 in the first nine months of 2009 due to lower pre-tax
earnings at GE Capital which were primarily driven by higher provisions for
losses on financing receivables in connection with the challenging economic
environment.
Income
Maintenance Agreement
On March
28, 1991, GE entered into an agreement with GE Capital to make payments to GE
Capital, constituting additions to pre-tax income under the agreement, to the
extent necessary to cause the ratio of earnings to fixed charges of GE Capital
and consolidated affiliates (determined on a consolidated basis) to be not less
than 1.10 for the period, as a single aggregation, of each GE Capital fiscal
year commencing with fiscal year 1991. On October 29, 2009 GE and GE Capital
amended this agreement (which is filed as Exhibit 10 hereto) to extend the
notice period for termination from three years to five years. It was further
amended to provide that any future amendments to the agreement that could
adversely affect GE Capital require the consent of the majority of the holders
of the aggregate outstanding principal amount of senior unsecured debt
securities issued or guaranteed by GE Capital (with an original stated maturity
in excess of 270 days), unless the amendment does not trigger a downgrade of GE
Capital’s long-term ratings.
GE made
a $9.5 billion capital contribution to GECS in the first quarter of 2009 (of
which $8.8 billion was further contributed to GE Capital through capital
contribution and share issuance) to improve tangible capital and reduce
leverage. This payment constitutes an addition to pre-tax income under the
agreement and therefore will increase the ratio of earnings to fixed charges of
GE Capital for the fiscal year 2009 for purposes of the agreement. The payment
will not affect the ratio of earnings to fixed charges as determined in
accordance with current SEC rules because it does not constitute an addition to
pre-tax income under current U.S. GAAP. We do not anticipate additional capital
contributions in 2009.
Variable
Interest Entities and Off-Balance Sheet Arrangements
In the
first quarter of 2009, we further reduced our investment in PTL by selling a 1%
limited partnership interest in PTL, a previously consolidated variable interest
entity, to Penske Truck Leasing Corporation, the general partner of PTL, whose
majority shareowner is a member of GE’s Board of Directors.
The
disposition of the shares, coupled with our resulting minority position on the
PTL advisory committee and related changes in our contractual rights, resulted
in the deconsolidation of PTL. We recognized a pre-tax gain on the sale of $296
million, including a gain on the remeasurement of our retained investment of
$189 million. The measurement of the fair value of our retained investment in
PTL was based on a methodology that incorporated both discounted cash flow
information and market data. In applying this methodology, we utilized different
sources of information, including actual operating results, future business
plans, economic projections and market observable pricing multiples of similar
businesses. The resulting fair value reflected our position as a noncontrolling
shareowner at the conclusion of the transaction. As of September 30, 2009, our
remaining equity investment in PTL was 49.9% and is accounted for under the
equity method.
E.
New Accounting Standards
On June
12, 2009, the FASB issued amendments to existing standards on accounting for
securitizations and consolidation of variable interest entities (VIEs), which
will be effective for us on January 1, 2010. The amendment to securitization
accounting will eliminate the qualifying special purpose entity (QSPE) concept,
and a corresponding amendment to the consolidation standard will require that
all such entities be evaluated for consolidation as VIEs, which will likely
result in our consolidating substantially all of our former QSPEs. Upon
adoption, we will record assets and liabilities of these entities at carrying
amounts consistent with what they would have been if they had always been
consolidated, which will require the reversal of a portion of previously
recognized securitization gains as a cumulative effect adjustment to retained
earnings. Alternatively, we may elect to record all qualifying financial assets
and liabilities of a VIE at fair value both on the date of adoption, as an
adjustment to retained earnings, and subsequently, through net earnings. Under
the revised guidance and assuming consolidation at carrying amount, at September
30, 2009, we would have recognized an increase in assets of approximately $30
billion and a reduction in equity of approximately $2 billion.
The
amended guidance on securitizations also modifies existing derecognition
criteria in a manner that will significantly narrow the types of transactions
that will qualify as sales. The revised criteria will apply prospectively to
transfers of financial assets occurring after December 31, 2009.
The
amended consolidation guidance for VIEs will also replace the existing
quantitative approach for identifying who should consolidate a VIE, which was
based on who is exposed to a majority of the risks and rewards, with a
qualitative approach, based on who has the power to direct the economically
significant activities of the entity. Under the revised guidance, more entities
may meet the definition of a VIE, and the determination about who should
consolidate a VIE is required to be evaluated continuously. Upon adoption,
assets and liabilities of consolidated VIEs will be recorded in the manner
described above for QSPEs. If it is not practicable to determine such carrying
amounts, assets and liabilities will be measured at their fair values on the
date of adoption. We are evaluating all entities that fall within the scope of
the amended guidance to determine whether we may be required to consolidate or
deconsolidate additional entities on January 1, 2010.
On
September 23, 2009, the FASB issued amendments to existing standards for revenue
arrangements with multiple components. The amendments generally require the
allocation of consideration to separate components based on the relative selling
price of each component in a revenue arrangement.
The
amendments also require certain software enabled products to be accounted for
under the general accounting standards for multiple component arrangements as
opposed to accounting standards specifically applicable to software
arrangements. We intend to adopt the amendments as of January 1, 2010 and, as a
result, will apply the guidance prospectively to arrangements entered into or
materially modified after that date. We are currently evaluating the financial
statement impact of adopting these amendments; however, we expect the effect to
be insignificant to our financial statements.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
There
have been no significant changes to our market risk since December 31, 2008. For
a discussion of our exposure to market risk, refer to Part II, Item 7A.
“Quantitative and Qualitative Disclosures about Market Risk,” contained in our
Annual Report on Form 10-K for the year ended December 31, 2008.
Item
4. Controls and Procedures.
Under
the direction of our Chief Executive Officer and Chief Financial Officer, we
evaluated our disclosure controls and procedures and internal control over
financial reporting and concluded that (i) our disclosure controls and
procedures were effective as of September 30, 2009, and (ii) no change in
internal control over financial reporting occurred during the quarter ended
September 30, 2009, that has materially affected, or is reasonably likely to
materially affect, such internal control over financial reporting.
Part
II. Other Information
The
following information supplements and amends our discussion set forth under Part
I, Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.
As
previously reported, in July and September 2008, shareholders filed two
purported class actions under the federal securities laws in the United States
District Court for the District of Connecticut naming us as defendant, as well
as our chief executive officer and chief financial officer. These two actions
have been consolidated and in January 2009, a consolidated complaint was filed
alleging that we and our chief executive officer made false and misleading
statements that artificially inflated our stock price between March 12, 2008 and
April 10, 2008, when we announced that our results for the first quarter of 2008
would not meet our previous guidance, and we also lowered our full year guidance
for 2008. The case seeks unspecified damages. Our motion to dismiss the
consolidated complaint was filed in March 2009 and is currently under
consideration by the court. We intend to defend ourselves
vigorously.
As
previously reported, in October 2008, shareholders filed a purported class
action under the federal securities laws in the United States District Court for
the Southern District of New York naming us as defendant, as well as our chief
executive officer and chief financial officer. The complaint alleges that during
a conference call with analysts on September 25, 2008, defendants made false and
misleading statements concerning (i) the state of GE’s funding, cash flows, and
liquidity and (ii) the question of issuing additional equity, which caused
economic loss to those shareholders who purchased GE stock between September 25,
2008 and October 2, 2008, when we announced the pricing of a common stock
offering. The case seeks unspecified damages. Our motion to dismiss the
complaint was filed in April 2009 and is currently under consideration by the
court. We intend to defend ourselves vigorously.
As
previously reported, in March and April 2009, shareholders filed purported class
actions under the federal securities laws in the United States District Court
for the Southern District of New York naming as defendants GE, a number of GE
officers (including our chief executive officer and chief financial officer) and
our directors. The complaints, which have now been consolidated, seek
unspecified damages based on allegations related to statements regarding the
dividend and projected losses and earnings for GE Capital in 2009. A shareholder
derivative action has been filed in federal court in Connecticut in May 2009
making essentially the same allegations as the New York class actions. We have
moved to consolidate the Connecticut derivative action with the recently
consolidated New York class actions.
As
previously reported, on August 4, 2009, the Company announced that it had
reached a settlement with the Securities and Exchange Commission (SEC) in
connection with an SEC investigation previously disclosed in our SEC
reports. Consistent with standard SEC practice, we neither admitted nor
denied the allegations in the SEC’s complaint. Under the terms of the
settlement, the Company consented to the entry of a judgment requiring it to pay
a civil penalty of $50 million and to comply with the federal securities laws.
This settlement, which brought the SEC investigation of GE to a close, relates
to four accounting matters arising in 2002 - 2003: the application of SFAS 133
to GE’s since-discontinued commercial paper hedging program and, separately, to
certain swap derivatives where fees were paid or received at inception; a change
in accounting for profits on spare parts in the commercial aviation engine
business; and certain year-end transactions in the Rail business. All of these
items were reviewed or discussed with KPMG, which audited the Company’s
financial statements throughout the periods in question. The Company previously
corrected its prior period financial statements for the effect of each of these
accounting matters in SEC filings made between May 2005 and February 2008, and
no further corrections were required.
GE
cooperated with the SEC over the course of its investigation, and GE and its
Audit Committee conducted their own comprehensive review in conjunction with the
SEC investigation. The Company reviewed and produced approximately 2.9 million
pages of e-mails and other documents to the SEC and incurred approximately $200
million in external legal and accounting expenses to ensure that all issues were
addressed appropriately. We concluded that it was in the best interests of GE
and its shareholders to resolve this matter and put it behind us on the basis
described above.
GE
implemented a number of remedial actions and internal control enhancements, as
previously described in its SEC reports, including measures to strengthen our
controllership and technical accounting resources and capabilities.
Item
2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
|
|
dollar
value
|
|
|
|
|
|
|
Total
number
|
|
of
shares that
|
|
|
|
|
|
|
of
shares
|
|
may
yet be
|
|
|
|
|
|
|
purchased
|
|
purchased
|
|
|
|
|
|
|
as
part of
|
|
under
our
|
|
|
Total
number
|
|
Average
|
|
of
our share
|
|
share
|
|
|
of
shares
|
|
price
paid
|
|
repurchase
|
|
repurchase
|
Period(a)
|
|
purchased
|
(a)(b)
|
per
share
|
|
program
|
(a)(c)
|
program
|
(Shares
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
July
|
|
|
519
|
|
$
|
11.82
|
|
|
425
|
|
|
|
August
|
|
|
901
|
|
$
|
13.15
|
|
|
530
|
|
|
|
September
|
|
|
765
|
|
$
|
15.53
|
|
|
553
|
|
|
|
Total
|
|
|
2,185
|
|
$
|
13.67
|
|
|
1,508
|
$
|
11.8
|
billion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Information
is presented on a fiscal calendar basis, consistent with our quarterly
financial reporting.
|
(b)
|
This
category includes 677 thousand shares repurchased from our various benefit
plans, primarily the GE Savings and Security Program (the S&SP).
Through the S&SP, a defined contribution plan with Internal Revenue
Service Code 401(k) features, we repurchase shares resulting from changes
in investment options by plan
participants.
|
(c)
|
This
balance represents the number of shares that were repurchased from the GE
Stock Direct Plan, a direct stock purchase plan that is available to the
public. Repurchases from GE Stock Direct are part of the 2007 GE Share
Repurchase Program (the Program) under which we are authorized to
repurchase up to $15 billion of our common stock through 2010. The Program
is flexible and shares are acquired with a combination of borrowings and
free cash flow from the public markets and other sources, including GE
Stock Direct. Effective September 25, 2008, we suspended the Program for
purchases other than from GE Stock
Direct.
|
On
October 29, 2009, the Company entered into an amendment to a 1991 agreement
between GE and GE Capital, which requires GE to make payments to GE Capital,
constituting additions to pre-tax income under the agreement, to the extent
necessary to cause the ratio of earnings to fixed charges of GE Capital and
consolidated affiliates (determined on a consolidated basis) to be not less than
1.10 for the period, as a single aggregation, of each GE Capital fiscal year
commencing with fiscal year 1991. The amended agreement (which is filed as
Exhibit 10 hereto and hereby incorporated by reference) extends the notice
period for termination from three years to five years. It further provides that
any future amendments to the agreement that could adversely affect GE Capital
require the consent of the majority of the holders of the aggregate outstanding
principal amount of senior unsecured debt securities issued or guaranteed by GE
Capital (with an original stated maturity in excess of 270 days), unless the
amendment does not trigger a downgrade of GE Capital’s long-term
ratings.
Exhibit
10
|
Amended
and Restated Income Maintenance Agreement, dated October 29, 2009, between
the Registrant and General Electric Capital Corporation (Incorporated by
reference to Exhibit 10 to General Electric Capital Corporation’s
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2009 (File No. 001-06461)).
|
Exhibit
11
|
Computation
of Per Share Earnings*.
|
Exhibit
12(a)
|
Computation
of Ratio of Earnings to Fixed Charges.
|
Exhibit
12(b)
|
Computation
of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
|
Exhibit
31(a)
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as Amended.
|
Exhibit
31(b)
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as Amended.
|
Exhibit
32
|
Certification
Pursuant to 18 U.S.C. Section 1350.
|
Exhibit
99(a)
|
Financial
Measures That Supplement Generally Accepted Accounting
Principles.
|
Exhibit
99(b)
|
Computation
of Ratio of Earnings to Fixed Charges (Incorporated by reference to
Exhibit 12 to General Electric Capital Corporation’s Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2009 (File No.
001-06461)).
|
|
*
|
Data
required by Financial Accounting Standards Board Accounting Standards
Codification 260, Earnings Per Share, is
provided in Note 13 to the condensed, consolidated financial
statements in this Report.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
General
Electric Company
(Registrant)
|
|
November
2, 2009
|
|
/s/
Jamie S. Miller
|
|
Date
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Jamie
S. Miller
Vice
President and Controller
Duly
Authorized Officer and Principal Accounting Officer
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