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 March
31, 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 10,589,575,000 shares of common stock with a par value of $0.06 per share
outstanding at March 27, 2009.
General
Electric Company
|
|
Page
|
Part
I – Financial Information
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
38
|
|
|
57
|
|
|
57
|
|
|
|
Part
II – Other Information
|
|
|
|
|
|
|
|
58
|
|
|
58
|
|
|
59
|
|
|
60
|
|
|
61
|
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 and
commercial paper exposure 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; 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.
Condensed
Statement of Earnings
General
Electric Company and consolidated affiliates
|
Three
months ended March 31 (Unaudited)
|
|
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
|
(In
millions; except share amounts)
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of goods
|
$
|
14,072
|
|
$
|
14,781
|
|
|
$
|
13,813
|
|
$
|
14,447
|
|
$
|
273
|
|
$
|
367
|
|
Sales
of services
|
|
10,055
|
|
|
9,541
|
|
|
|
10,209
|
|
|
9,739
|
|
|
–
|
|
|
–
|
|
Other
income
|
|
428
|
|
|
575
|
|
|
|
479
|
|
|
658
|
|
|
–
|
|
|
–
|
|
GECS
earnings from continuing operations
|
|
–
|
|
|
–
|
|
|
|
961
|
|
|
2,456
|
|
|
–
|
|
|
–
|
|
GECS
revenues from services
|
|
13,856
|
|
|
17,331
|
|
|
|
–
|
|
|
–
|
|
|
14,157
|
|
|
17,671
|
|
Total
revenues
|
|
38,411
|
|
|
42,228
|
|
|
|
25,462
|
|
|
27,300
|
|
|
14,430
|
|
|
18,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
11,433
|
|
|
11,908
|
|
|
|
11,222
|
|
|
11,623
|
|
|
224
|
|
|
317
|
|
Cost
of services sold
|
|
6,633
|
|
|
6,085
|
|
|
|
6,787
|
|
|
6,283
|
|
|
–
|
|
|
–
|
|
Interest
and other financial charges
|
|
5,327
|
|
|
6,527
|
|
|
|
376
|
|
|
602
|
|
|
5,121
|
|
|
6,176
|
|
Investment
contracts, insurance losses and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
insurance
annuity benefits
|
|
746
|
|
|
804
|
|
|
|
–
|
|
|
–
|
|
|
773
|
|
|
848
|
|
Provision
for losses on financing receivables
|
|
2,336
|
|
|
1,343
|
|
|
|
–
|
|
|
–
|
|
|
2,336
|
|
|
1,343
|
|
Other
costs and expenses
|
|
9,337
|
|
|
10,207
|
|
|
|
3,364
|
|
|
3,552
|
|
|
6,129
|
|
|
6,784
|
|
Total
costs and expenses
|
|
35,812
|
|
|
36,874
|
|
|
|
21,749
|
|
|
22,060
|
|
|
14,583
|
|
|
15,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
2,599
|
|
|
5,354
|
|
|
|
3,713
|
|
|
5,240
|
|
|
(153
|
)
|
|
2,570
|
|
Benefit
(provision) for income taxes
|
|
318
|
|
|
(841
|
)
|
|
|
(842
|
)
|
|
(758
|
)
|
|
1,160
|
|
|
(83
|
)
|
Earnings
from continuing operations
|
|
2,917
|
|
|
4,513
|
|
|
|
2,871
|
|
|
4,482
|
|
|
1,007
|
|
|
2,487
|
|
Loss
from discontinued operations, net of taxes
|
|
(21
|
)
|
|
(47
|
)
|
|
|
(21
|
)
|
|
(47
|
)
|
|
(4
|
)
|
|
(61
|
)
|
Net
earnings
|
|
2,896
|
|
|
4,466
|
|
|
|
2,850
|
|
|
4,435
|
|
|
1,003
|
|
|
2,426
|
|
Less
net earnings attributable to noncontrolling interests
|
|
85
|
|
|
162
|
|
|
|
39
|
|
|
131
|
|
|
46
|
|
|
31
|
|
Net
earnings attributable to the Company
|
|
2,811
|
|
|
4,304
|
|
|
|
2,811
|
|
|
4,304
|
|
|
957
|
|
|
2,395
|
|
Preferred
stock dividends declared
|
|
(75
|
)
|
|
–
|
|
|
|
(75
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
|
$
|
2,736
|
|
$
|
4,304
|
|
|
$
|
2,736
|
|
$
|
4,304
|
|
$
|
957
|
|
$
|
2,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
2,832
|
|
$
|
4,351
|
|
|
$
|
2,832
|
|
$
|
4,351
|
|
$
|
961
|
|
$
|
2,456
|
|
Loss
from discontinued operations, net of taxes
|
|
(21
|
)
|
|
(47
|
)
|
|
|
(21
|
)
|
|
(47
|
)
|
|
(4
|
)
|
|
(61
|
)
|
Net
earnings attributable to the Company
|
$
|
2,811
|
|
$
|
4,304
|
|
|
$
|
2,811
|
|
$
|
4,304
|
|
$
|
957
|
|
$
|
2,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.26
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.26
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
$
|
0.26
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
|
0.26
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
$
|
0.31
|
|
$
|
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
accompanying notes. Separate information is shown for “GE” and “Financial
Services (GECS).” Transactions between GE and GECS have been eliminated
from the “Consolidated” columns.
|
Condensed
Statement of Financial Position
General
Electric Company and consolidated affiliates
|
Consolidated
|
|
|
GE(a)
|
|
Financial
Services (GECS)
|
|
(In
millions; except share amounts)
|
March
31,
2009
|
|
December 31,
2008
|
|
|
March
31,
2009
|
|
December 31,
2008
|
|
March
31,
2009
|
|
December 31,
2008
|
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and equivalents
|
$
|
46,830
|
|
$
|
48,187
|
|
|
$
|
2,127
|
|
$
|
12,090
|
|
$
|
45,240
|
|
$
|
37,486
|
|
Investment
securities
|
|
41,931
|
|
|
41,446
|
|
|
|
150
|
|
|
213
|
|
|
41,783
|
|
|
41,236
|
|
Current
receivables
|
|
19,198
|
|
|
21,411
|
|
|
|
12,611
|
|
|
15,064
|
|
|
–
|
|
|
–
|
|
Inventories
|
|
13,831
|
|
|
13,674
|
|
|
|
13,766
|
|
|
13,597
|
|
|
65
|
|
|
77
|
|
Financing
receivables – net
|
|
347,647
|
|
|
365,168
|
|
|
|
–
|
|
|
–
|
|
|
355,036
|
|
|
372,456
|
|
Other
GECS receivables
|
|
13,182
|
|
|
13,439
|
|
|
|
–
|
|
|
–
|
|
|
17,728
|
|
|
18,636
|
|
Property,
plant and equipment (including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equipment
leased to others) – net
|
|
72,222
|
|
|
78,530
|
|
|
|
14,032
|
|
|
14,433
|
|
|
58,190
|
|
|
64,097
|
|
Investment
in GECS
|
|
–
|
|
|
–
|
|
|
|
60,756
|
|
|
53,279
|
|
|
–
|
|
|
–
|
|
Goodwill
|
|
80,640
|
|
|
81,759
|
|
|
|
56,203
|
|
|
56,394
|
|
|
24,437
|
|
|
25,365
|
|
Other
intangible assets – net
|
|
14,758
|
|
|
14,977
|
|
|
|
11,342
|
|
|
11,364
|
|
|
3,416
|
|
|
3,613
|
|
All
other assets
|
|
109,040
|
|
|
106,899
|
|
|
|
22,219
|
|
|
22,435
|
|
|
88,180
|
|
|
85,721
|
|
Assets
of businesses held for sale
|
|
–
|
|
|
10,556
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
10,556
|
|
Assets
of discontinued operations
|
|
1,528
|
|
|
1,723
|
|
|
|
64
|
|
|
64
|
|
|
1,464
|
|
|
1,659
|
|
Total
assets
|
$
|
760,807
|
|
$
|
797,769
|
|
|
$
|
193,270
|
|
$
|
198,933
|
|
$
|
635,539
|
|
$
|
660,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
176,320
|
|
$
|
193,695
|
|
|
$
|
1,614
|
|
$
|
2,375
|
|
$
|
175,676
|
|
$
|
193,533
|
|
Accounts
payable, principally trade accounts
|
|
18,171
|
|
|
20,819
|
|
|
|
10,677
|
|
|
11,699
|
|
|
11,718
|
|
|
13,882
|
|
Progress
collections and price adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued
|
|
11,821
|
|
|
12,536
|
|
|
|
12,312
|
|
|
13,058
|
|
|
–
|
|
|
–
|
|
Other
GE current liabilities
|
|
21,494
|
|
|
21,560
|
|
|
|
21,494
|
|
|
21,624
|
|
|
–
|
|
|
–
|
|
Long-term
borrowings
|
|
327,658
|
|
|
330,067
|
|
|
|
11,171
|
|
|
9,827
|
|
|
317,412
|
|
|
321,068
|
|
Investment
contracts, insurance liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
insurance annuity benefits
|
|
33,437
|
|
|
34,032
|
|
|
|
–
|
|
|
–
|
|
|
33,946
|
|
|
34,369
|
|
All
other liabilities
|
|
55,911
|
|
|
64,796
|
|
|
|
32,192
|
|
|
32,767
|
|
|
23,846
|
|
|
32,090
|
|
Deferred
income taxes
|
|
5,179
|
|
|
4,584
|
|
|
|
(3,872
|
)
|
|
(3,949
|
)
|
|
9,051
|
|
|
8,533
|
|
Liabilities
of businesses held for sale
|
|
–
|
|
|
636
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
636
|
|
Liabilities
of discontinued operations
|
|
1,340
|
|
|
1,432
|
|
|
|
175
|
|
|
189
|
|
|
1,165
|
|
|
1,243
|
|
Total
liabilities
|
|
651,331
|
|
|
684,157
|
|
|
|
85,763
|
|
|
87,590
|
|
|
572,814
|
|
|
605,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock (30,000 shares outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
both
March 31, 2009 and December 31, 2008)
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Common
stock (10,589,575,000 and 10,536,897,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding at March 31, 2009 and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008, respectively)
|
|
702
|
|
|
702
|
|
|
|
702
|
|
|
702
|
|
|
1
|
|
|
1
|
|
Accumulated
other comprehensive income – net(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities
|
|
(3,729
|
)
|
|
(3,094
|
)
|
|
|
(3,729
|
)
|
|
(3,094
|
)
|
|
(3,733
|
)
|
|
(3,097
|
)
|
Currency
translation adjustments
|
|
(4,359
|
)
|
|
(299
|
)
|
|
|
(4,359
|
)
|
|
(299
|
)
|
|
(4,307
|
)
|
|
(1,258
|
)
|
Cash
flow hedges
|
|
(2,615
|
)
|
|
(3,332
|
)
|
|
|
(2,615
|
)
|
|
(3,332
|
)
|
|
(2,438
|
)
|
|
(3,134
|
)
|
Benefit
plans
|
|
(14,889
|
)
|
|
(15,128
|
)
|
|
|
(14,889
|
)
|
|
(15,128
|
)
|
|
(359
|
)
|
|
(367
|
)
|
Other
capital
|
|
39,150
|
|
|
40,390
|
|
|
|
39,150
|
|
|
40,390
|
|
|
27,580
|
|
|
18,079
|
|
Retained
earnings
|
|
121,572
|
|
|
122,123
|
|
|
|
121,572
|
|
|
122,123
|
|
|
44,012
|
|
|
43,055
|
|
Less
common stock held in treasury
|
|
(34,813
|
)
|
|
(36,697
|
)
|
|
|
(34,813
|
)
|
|
(36,697
|
)
|
|
–
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
GE shareowners’ equity
|
|
101,019
|
|
|
104,665
|
|
|
|
101,019
|
|
|
104,665
|
|
|
60,756
|
|
|
53,279
|
|
Noncontrolling
interests(c)
|
|
8,457
|
|
|
8,947
|
|
|
|
6,488
|
|
|
6,678
|
|
|
1,969
|
|
|
2,269
|
|
Total
equity
|
|
109,476
|
|
|
113,612
|
|
|
|
107,507
|
|
|
111,343
|
|
|
62,725
|
|
|
55,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
$
|
760,807
|
|
$
|
797,769
|
|
|
$
|
193,270
|
|
$
|
198,933
|
|
$
|
635,539
|
|
$
|
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 $(25,592) million
and $(21,853) million at March 31, 2009 and December 31, 2008,
respectively.
|
(c)
|
Included
accumulated other comprehensive income attributable to noncontrolling
interests of $119 million and $149 million at March 31, 2009 and December
31, 2008, respectively.
|
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.
|
Condensed
Statement of Cash Flows
General
Electric Company and consolidated affiliates
|
Three
months ended March 31 (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
|
$
|
2,811
|
|
$
|
4,304
|
|
|
$
|
2,811
|
|
$
|
4,304
|
|
$
|
957
|
|
$
|
2,395
|
|
Loss
from discontinued operations
|
|
21
|
|
|
47
|
|
|
|
21
|
|
|
47
|
|
|
4
|
|
|
61
|
|
Adjustments
to reconcile net earnings attributable to the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
to cash provided from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization of property,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plant
and equipment
|
|
2,731
|
|
|
2,682
|
|
|
|
550
|
|
|
556
|
|
|
2,181
|
|
|
2,126
|
|
Earnings
from continuing operations retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by
GECS
|
|
–
|
|
|
–
|
|
|
|
(961
|
)
|
|
(1,326
|
)
|
|
–
|
|
|
–
|
|
Deferred
income taxes
|
|
(528
|
)
|
|
(990
|
)
|
|
|
74
|
|
|
(352
|
)
|
|
(602
|
)
|
|
(638
|
)
|
Decrease
in GE current receivables
|
|
1,952
|
|
|
106
|
|
|
|
2,225
|
|
|
396
|
|
|
–
|
|
|
–
|
|
Decrease
(increase) in inventories
|
|
(178
|
)
|
|
(1,412
|
)
|
|
|
(170
|
)
|
|
(1,375
|
)
|
|
12
|
|
|
(6
|
)
|
Increase
(decrease) in accounts payable
|
|
(1,672
|
)
|
|
369
|
|
|
|
(555
|
)
|
|
125
|
|
|
(1,655
|
)
|
|
271
|
|
Increase
(decrease) in GE progress collections
|
|
(724
|
)
|
|
1,436
|
|
|
|
(755
|
)
|
|
1,553
|
|
|
–
|
|
|
–
|
|
Provision
for losses on GECS financing receivables
|
|
2,336
|
|
|
1,343
|
|
|
|
–
|
|
|
–
|
|
|
2,336
|
|
|
1,343
|
|
All
other operating activities
|
|
(7,168
|
)
|
|
(1,327
|
)
|
|
|
(401
|
)
|
|
926
|
|
|
(6,707
|
)
|
|
(2,217
|
)
|
Cash
from (used for) operating activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
(419
|
)
|
|
6,558
|
|
|
|
2,839
|
|
|
4,854
|
|
|
(3,474
|
)
|
|
3,335
|
|
Cash
from (used for) operating activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
(45
|
)
|
|
367
|
|
|
|
–
|
|
|
–
|
|
|
(45
|
)
|
|
367
|
|
Cash
from (used for) operating activities
|
|
(464
|
)
|
|
6,925
|
|
|
|
2,839
|
|
|
4,854
|
|
|
(3,519
|
)
|
|
3,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows – investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
(2,560
|
)
|
|
(3,718
|
)
|
|
|
(756
|
)
|
|
(894
|
)
|
|
(1,896
|
)
|
|
(2,955
|
)
|
Dispositions
of property, plant and equipment
|
|
1,183
|
|
|
3,212
|
|
|
|
–
|
|
|
–
|
|
|
1,183
|
|
|
3,212
|
|
Net
decrease (increase) in GECS financing receivables
|
|
18,024
|
|
|
(11,845
|
)
|
|
|
–
|
|
|
–
|
|
|
17,962
|
|
|
(12,448
|
)
|
Proceeds
from sales of discontinued operations
|
|
–
|
|
|
203
|
|
|
|
–
|
|
|
203
|
|
|
–
|
|
|
–
|
|
Proceeds
from principal business dispositions
|
|
9,021
|
|
|
4,305
|
|
|
|
175
|
|
|
–
|
|
|
8,846
|
|
|
4,305
|
|
Payments
for principal businesses purchased
|
|
(7,128
|
)
|
|
(12,759
|
)
|
|
|
(306
|
)
|
|
(107
|
)
|
|
(6,822
|
)
|
|
(12,652
|
)
|
Capital
contribution from GE to GECS
|
|
–
|
|
|
–
|
|
|
|
(9,500
|
)
|
|
–
|
|
|
–
|
|
|
–
|
|
All
other investing activities
|
|
(2,691
|
)
|
|
(722
|
)
|
|
|
54
|
|
|
(35
|
)
|
|
(2,082
|
)
|
|
(375
|
)
|
Cash
from (used for) investing activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
15,849
|
|
|
(21,324
|
)
|
|
|
(10,333
|
)
|
|
(833
|
)
|
|
17,191
|
|
|
(20,913
|
)
|
Cash
from (used for) investing activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
47
|
|
|
(358
|
)
|
|
|
–
|
|
|
–
|
|
|
47
|
|
|
(358
|
)
|
Cash
from (used for) investing activities
|
|
15,896
|
|
|
(21,682
|
)
|
|
|
(10,333
|
)
|
|
(833
|
)
|
|
17,238
|
|
|
(21,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows – financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in borrowings (maturities of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
days or less)
|
|
(17,897
|
)
|
|
2,201
|
|
|
|
990
|
|
|
(1,658
|
)
|
|
(20,129
|
)
|
|
3,842
|
|
Newly
issued debt (maturities longer than 90 days)
|
|
32,064
|
|
|
35,827
|
|
|
|
1,226
|
|
|
39
|
|
|
30,935
|
|
|
35,936
|
|
Repayments
and other reductions (maturities longer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
than
90 days)
|
|
(27,272
|
)
|
|
(20,239
|
)
|
|
|
(1,580
|
)
|
|
(46
|
)
|
|
(25,692
|
)
|
|
(20,193
|
)
|
Net
dispositions (purchases) of GE shares for treasury
|
|
245
|
|
|
(864
|
)
|
|
|
245
|
|
|
(864
|
)
|
|
–
|
|
|
–
|
|
Dividends
paid to shareowners
|
|
(3,350
|
)
|
|
(3,110
|
)
|
|
|
(3,350
|
)
|
|
(3,110
|
)
|
|
–
|
|
|
(1,130
|
)
|
Capital
contribution from GE to GECS
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
9,500
|
|
|
–
|
|
All
other financing activities
|
|
(577
|
)
|
|
498
|
|
|
|
–
|
|
|
–
|
|
|
(577
|
)
|
|
498
|
|
Cash
from (used for) financing activities – continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
(16,787
|
)
|
|
14,313
|
|
|
|
(2,469
|
)
|
|
(5,639
|
)
|
|
(5,963
|
)
|
|
18,953
|
|
Cash
from (used for) financing activities – discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
–
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Cash
from (used for) financing activities
|
|
(16,787
|
)
|
|
14,313
|
|
|
|
(2,469
|
)
|
|
(5,639
|
)
|
|
(5,963
|
)
|
|
18,953
|
|
Increase
(decrease) in cash and equivalents
|
|
(1,355
|
)
|
|
(444
|
)
|
|
|
(9,963
|
)
|
|
(1,618
|
)
|
|
7,756
|
|
|
1,384
|
|
Cash
and equivalents at beginning of year
|
|
48,367
|
|
|
16,031
|
|
|
|
12,090
|
|
|
6,702
|
|
|
37,666
|
|
|
9,739
|
|
Cash
and equivalents at March 31
|
|
47,012
|
|
|
15,587
|
|
|
|
2,127
|
|
|
5,084
|
|
|
45,422
|
|
|
11,123
|
|
Less
cash and equivalents of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
March 31
|
|
182
|
|
|
309
|
|
|
|
–
|
|
|
–
|
|
|
182
|
|
|
309
|
|
Cash
and equivalents of continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
March 31
|
$
|
46,830
|
|
$
|
15,278
|
|
|
$
|
2,127
|
|
$
|
5,084
|
|
$
|
45,240
|
|
$
|
10,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
accompanying notes. Separate information is shown for “GE” and “Financial
Services (GECS).” Transactions between GE and GECS have been eliminated
from the “Consolidated” columns and are discussed in Note
19.
|
Summary
of Operating Segments
General
Electric Company and consolidated affiliates
|
Three
months ended March 31
(Unaudited)
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
8,239
|
|
$
|
7,724
|
|
Technology
Infrastructure
|
|
10,436
|
|
|
10,460
|
|
NBC
Universal
|
|
3,524
|
|
|
3,584
|
|
Capital
Finance
|
|
13,088
|
|
|
16,969
|
|
Consumer
& Industrial
|
|
2,221
|
|
|
2,862
|
|
Total
segment revenues
|
|
37,508
|
|
|
41,599
|
|
Corporate
items and eliminations
|
|
903
|
|
|
629
|
|
Consolidated
revenues
|
$
|
38,411
|
|
$
|
42,228
|
|
|
|
|
|
|
|
|
Segment profit(a)
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
1,273
|
|
$
|
1,070
|
|
Technology
Infrastructure
|
|
1,803
|
|
|
1,701
|
|
NBC
Universal
|
|
391
|
|
|
712
|
|
Capital
Finance
|
|
1,119
|
|
|
2,679
|
|
Consumer
& Industrial
|
|
36
|
|
|
144
|
|
Total
segment profit
|
|
4,622
|
|
|
6,306
|
|
Corporate
items and eliminations
|
|
(572
|
)
|
|
(595
|
)
|
GE
interest and other financial charges
|
|
(376
|
)
|
|
(602
|
)
|
GE
provision for income taxes
|
|
(842
|
)
|
|
(758
|
)
|
Earnings
from continuing operations attributable to the Company
|
|
2,832
|
|
|
4,351
|
|
Loss
from discontinued operations, net of taxes, attributable
|
|
|
|
|
|
|
to
the Company
|
|
(21
|
)
|
|
(47
|
)
|
Consolidated
net earnings attributable to the Company
|
$
|
2,811
|
|
$
|
4,304
|
|
|
|
|
|
|
|
|
(a)
|
Segment
profit always excludes the effects of principal pension plans, results
reported as discontinued operations, earnings attributable to
noncontrolling interests 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.
|
Notes
to Condensed, Consolidated Financial Statements (Unaudited)
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.
Accounting
changes
Effective
January 1, 2008, we adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, for
all financial instruments and non-financial instruments accounted for at fair
value on a recurring basis. Effective January 1, 2009, we adopted SFAS 157 for
all non-financial instruments accounted for at fair value on a non-recurring
basis. SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. See Note 15.
On
January 1, 2009, we adopted SFAS 141(R), Business Combinations. This
standard significantly changes 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 issued FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies, which amends the accounting in SFAS 141(R) for assets and
liabilities arising from contingencies in a business combination. The FSP is
effective January 1, 2009, and requires pre-acquisition contingencies to be
recognized at fair value, if fair value can be reasonably determined during the
measurement period. If fair value cannot be reasonably determined, the FSP
requires measurement based on the recognition and measurement criteria of SFAS
5, Accounting for
Contingencies.
On
January 1, 2009, we adopted SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51,
which requires us to make certain changes to the presentation of our financial
statements. This standard requires us to classify noncontrolling interests
(previously referred to as “minority interest”) as part of consolidated net
earnings ($85 million and $162 million for the three months ended March 31, 2009
and 2008, respectively) and to include the accumulated amount of noncontrolling
interests as part of shareowners' equity ($8,457 million and $8,947 million at
March 31, 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 by SFAS 160, 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. In
addition to these financial reporting changes, SFAS 160 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 Emerging Issues Task Force (EITF) Issue 07-1, Accounting for 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. Participation fees earned and
recorded as other income totaled an insignificant amount in the first quarter of
2009, and $451 million and $540 million for the years 2008 and 2007,
respectively. Payments to participants are recorded as costs of services sold
($103 million in the first quarter of 2009, and $423 million and $320 million
for the years 2008 and 2007, respectively) or as cost of goods sold ($439
million in the first quarter of 2009, and $1,932 million and $1,623 million for
the years 2008 and 2007, respectively).
2.
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. 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.
3.
DISCONTINUED OPERATIONS
Discontinued
operations comprised GE Money Japan (our Japanese personal loan business, Lake,
and our Japanese mortgage and card businesses, excluding our minority ownership
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 minority ownership 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 $2,800
million. Estimated claims are not expected to exceed those levels and are based
on our historical claims experience and the estimated future requests, taking
into consideration the ability and likelihood of customers to make claims and
other industry risk factors. However, 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 review our estimated exposure quarterly, and make
adjustments when required. To date, there have been no adjustments to sale
proceeds for this matter. GE Money Japan revenues from discontinued operations
were $1 million and $290 million in the first quarters of 2009 and 2008,
respectively. In total, GE Money Japan earnings (loss) from discontinued
operations, net of taxes, were $4 million and $(37) million in the first
quarters 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 $246 million
at March 31, 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 $(7) million and $5 million in the
first quarters of 2009 and 2008, respectively. In total, WMC’s losses from
discontinued operations, net of taxes, were $6 million and $7 million in the
first quarters of 2009 and 2008, respectively.
GE
industrial earnings (loss) from discontinued operations, net of taxes, were
$(17) million and $14 million in the first quarters of 2009 and 2008,
respectively.
Assets
of GE industrial discontinued operations were $64 million at both March 31, 2009
and December 31, 2008. Liabilities of GE industrial discontinued operations were
$175 million and $189 million at March 31, 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 March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Operations
|
|
|
|
|
|
|
Total
revenues
|
$
|
(6
|
)
|
$
|
295
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations before
|
|
|
|
|
|
|
income
taxes
|
$
|
(12
|
)
|
$
|
(101
|
)
|
Income
tax benefit
|
|
4
|
|
|
40
|
|
Loss
from discontinued operations,
|
|
|
|
|
|
|
net
of taxes
|
$
|
(8
|
)
|
$
|
(61
|
)
|
|
|
|
|
|
|
|
Disposal
|
|
|
|
|
|
|
Gain
on disposal before income taxes
|
$
|
7
|
|
$
|
–
|
|
Income
tax expense
|
|
(3
|
)
|
|
–
|
|
Gain
on disposal, net of taxes
|
$
|
4
|
|
$
|
–
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations, net of taxes(a)
|
$
|
(4
|
)
|
$
|
(61
|
)
|
|
|
|
|
|
|
|
(a)
|
The
sum of GE industrial earnings (loss) from discontinued operations, net of
taxes, and GECS 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
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash
and equivalents
|
$
|
182
|
|
$
|
180
|
|
All
other assets
|
|
14
|
|
|
19
|
|
Other
|
|
1,268
|
|
|
1,460
|
|
Assets
of discontinued operations
|
$
|
1,464
|
|
$
|
1,659
|
|
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Liabilities
of discontinued operations
|
$
|
1,165
|
|
$
|
1,243
|
|
Assets
at March 31, 2009 and December 31, 2008, were primarily comprised of a deferred
tax asset for a loss carryforward, which expires in 2015, related to the sale of
our GE Money Japan business.
4.
GECS REVENUES FROM SERVICES
GECS
revenues from services are summarized in the following table.
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Interest
on loans
|
$
|
5,073
|
|
$
|
6,499
|
|
Equipment
leased to others
|
|
3,485
|
|
|
3,810
|
|
Fees
|
|
1,160
|
|
|
1,369
|
|
Financing
leases
|
|
908
|
|
|
1,163
|
|
Real
estate investments
|
|
347
|
|
|
1,161
|
|
Premiums
earned by insurance activities
|
|
510
|
|
|
542
|
|
Associated
companies
|
|
165
|
|
|
469
|
|
Investment
income(a)
|
|
665
|
|
|
842
|
|
Net
securitization gains
|
|
326
|
|
|
386
|
|
Other
items(b)
|
|
1,518
|
|
|
1,430
|
|
Total
|
$
|
14,157
|
|
$
|
17,671
|
|
|
|
|
|
|
|
|
(a)
|
Included
other-than-temporary impairments on investment securities of $232 million
and $162 million in the first quarters of 2009 and 2008,
respectively.
|
(b)
|
Included
a gain on the sale of a limited partnership interest in Penske Truck
Leasing Co., L.P. (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 18.
|
5.
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
|
|
Other
Pension Plans
|
|
(In
millions)
|
Three
months ended March 31
|
|
Three
months ended March 31
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
$
|
(1,126
|
)
|
$
|
(1,075
|
)
|
$
|
(106
|
)
|
$
|
(137
|
)
|
Service
cost for benefits earned
|
|
353
|
|
|
300
|
|
|
83
|
|
|
80
|
|
Interest
cost on benefit obligation
|
|
669
|
|
|
661
|
|
|
112
|
|
|
124
|
|
Prior
service cost amortization
|
|
81
|
|
|
81
|
|
|
2
|
|
|
3
|
|
Net
actuarial loss amortization
|
|
90
|
|
|
54
|
|
|
29
|
|
|
19
|
|
Pension
plans cost
|
$
|
67
|
|
$
|
21
|
|
$
|
120
|
|
$
|
89
|
|
The
effect on operations of principal retiree health and life insurance plans
follows.
|
Principal
Retiree Health and
Life
Insurance Plans
|
|
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Expected
return on plan assets
|
$
|
(32
|
)
|
$
|
(33
|
)
|
Service
cost for benefits earned
|
|
74
|
|
|
63
|
|
Interest
cost on benefit obligation
|
|
177
|
|
|
198
|
|
Prior
service cost amortization
|
|
168
|
|
|
168
|
|
Net
actuarial loss (gain) amortization
|
|
(27
|
)
|
|
9
|
|
Retiree
benefit plans cost
|
$
|
360
|
|
$
|
405
|
|
6.
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.
Under applicable accounting rules, this tax benefit is recorded entirely in the
first quarter tax provision and will not affect the tax provision for future
quarters 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
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Unrecognized
tax benefits
|
$
|
6,819
|
|
$
|
6,692
|
|
Portion
that, if recognized, would reduce tax expense and effective tax rate(a)
|
|
4,766
|
|
|
4,453
|
|
Accrued
interest on unrecognized tax benefits
|
|
1,271
|
|
|
1,204
|
|
Accrued
penalties on unrecognized tax benefits
|
|
90
|
|
|
96
|
|
Reasonably
possible reduction to the balance of unrecognized tax
benefits
|
|
|
|
|
|
|
in
succeeding 12 months
|
|
0-1,600
|
|
|
0-1,500
|
|
Portion
that, if recognized, would reduce tax expense and effective tax rate(a)
|
|
0-1,350
|
|
|
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.
7.
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 March 31
|
|
|
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
|
$
|
2,823
|
|
$
|
2,823
|
|
$
|
4,351
|
|
$
|
4,351
|
|
Preferred
stock dividends declared
|
|
(75
|
)
|
|
(75
|
)
|
|
–
|
|
|
–
|
|
Earnings
from continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareowners for per-share calculation
|
$
|
2,748
|
|
$
|
2,748
|
|
$
|
4,351
|
|
$
|
4,351
|
|
Loss
from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
for
per-share calculation
|
|
(21
|
)
|
|
(21
|
)
|
|
(47
|
)
|
|
(47
|
)
|
Net
earnings attributable to GE common
|
|
|
|
|
|
|
|
|
|
|
|
|
shareowners
for per-share calculation
|
|
2,727
|
|
|
2,727
|
|
|
4,304
|
|
|
4,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
equivalent shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of GE common stock outstanding
|
|
10,564
|
|
|
10,564
|
|
|
9,978
|
|
|
9,978
|
|
Employee
compensation-related shares,
|
|
|
|
|
|
|
|
|
|
|
|
|
including
stock options
|
|
–
|
|
|
–
|
|
|
28
|
|
|
–
|
|
Total
average equivalent shares
|
|
10,564
|
|
|
10,564
|
|
|
10,006
|
|
|
9,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per-share
amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
0.26
|
|
$
|
0.26
|
|
$
|
0.43
|
|
$
|
0.44
|
|
Loss
from discontinued operations
|
|
–
|
|
|
–
|
|
|
–
|
|
|
–
|
|
Net
earnings
|
|
0.26
|
|
|
0.26
|
|
|
0.43
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
January 1, 2009, we adopted FSP EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities. Under the FSP, 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 the standard had an insignificant
effect.
|
(a)
|
At
March 31, 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, 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.
8.
INVESTMENT SECURITIES
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
|
|
|
March
31, 2009
|
|
December
31, 2008
|
|
(In
millions)
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
|
Amortized
cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
– U.S. corporate
|
$
|
132
|
|
$
|
–
|
|
$
|
–
|
|
$
|
132
|
|
$
|
182
|
|
$
|
–
|
|
$
|
–
|
|
$
|
182
|
|
Equity
– available-for-sale
|
|
18
|
|
|
1
|
|
|
(1
|
)
|
|
18
|
|
|
32
|
|
|
–
|
|
|
(1
|
)
|
|
31
|
|
|
|
150
|
|
|
1
|
|
|
(1
|
)
|
|
150
|
|
|
214
|
|
|
–
|
|
|
(1
|
)
|
|
213
|
|
GECS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
|
23,948
|
|
|
230
|
|
|
(3,176
|
)
|
|
21,002
|
|
|
22,183
|
|
|
512
|
|
|
(2,477
|
)
|
|
20,218
|
|
State
and municipal
|
|
1,531
|
|
|
21
|
|
|
(293
|
)
|
|
1,259
|
|
|
1,556
|
|
|
19
|
|
|
(94
|
)
|
|
1,481
|
|
Residential
mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
backed(a)
|
|
4,844
|
|
|
89
|
|
|
(1,121
|
)
|
|
3,812
|
|
|
5,326
|
|
|
70
|
|
|
(1,052
|
)
|
|
4,344
|
|
Commercial
mortgage-backed
|
|
3,072
|
|
|
11
|
|
|
(914
|
)
|
|
2,169
|
|
|
2,910
|
|
|
14
|
|
|
(788
|
)
|
|
2,136
|
|
Asset-backed
|
|
2,767
|
|
|
2
|
|
|
(531
|
)
|
|
2,238
|
|
|
2,881
|
|
|
1
|
|
|
(691
|
)
|
|
2,191
|
|
Corporate
– non-U.S.
|
|
1,506
|
|
|
16
|
|
|
(202
|
)
|
|
1,320
|
|
|
1,441
|
|
|
14
|
|
|
(166
|
)
|
|
1,289
|
|
Government
– non-U.S.
|
|
1,550
|
|
|
49
|
|
|
(23
|
)
|
|
1,576
|
|
|
1,300
|
|
|
61
|
|
|
(19
|
)
|
|
1,342
|
|
U.S.
government and federal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency
|
|
826
|
|
|
62
|
|
|
(138
|
)
|
|
750
|
|
|
739
|
|
|
65
|
|
|
(100
|
)
|
|
704
|
|
Retained
interests(b)(c)
|
|
6,437
|
|
|
115
|
|
|
(108
|
)
|
|
6,444
|
|
|
6,395
|
|
|
113
|
|
|
(152
|
)
|
|
6,356
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
869
|
|
|
33
|
|
|
(113
|
)
|
|
789
|
|
|
921
|
|
|
26
|
|
|
(160
|
)
|
|
787
|
|
Trading
|
|
424
|
|
|
–
|
|
|
–
|
|
|
424
|
|
|
388
|
|
|
–
|
|
|
–
|
|
|
388
|
|
|
|
47,774
|
|
|
628
|
|
|
(6,619
|
)
|
|
41,783
|
|
|
46,040
|
|
|
895
|
|
|
(5,699
|
)
|
|
41,236
|
|
Eliminations
|
|
(7
|
)
|
|
–
|
|
|
5
|
|
|
(2
|
)
|
|
(7
|
)
|
|
–
|
|
|
4
|
|
|
(3
|
)
|
Total
|
$
|
47,917
|
|
$
|
629
|
|
$
|
(6,615
|
)
|
$
|
41,931
|
|
$
|
46,247
|
|
$
|
895
|
|
$
|
(5,696
|
)
|
$
|
41,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Substantially
collateralized by U.S. mortgages.
|
(b)
|
Included
$1,904 million and $1,752 million of retained interests at March 31, 2009
and December 31, 2008, respectively, accounted for in accordance with SFAS
155, Accounting for
Certain Hybrid Financial Instruments. See Note
18.
|
(c)
|
Amortized
cost and estimated fair value included $23 million and $20 million of
trading securities at March 31, 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
|
|
(In
millions)
|
Estimated
fair
value
|
|
Gross
unrealized
losses
|
|
Estimated
fair
value
|
|
Gross
unrealized
losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
corporate
|
$
|
7,224
|
|
$
|
(834
|
)
|
$
|
6,430
|
|
$
|
(2,342
|
)
|
State
and municipal
|
|
495
|
|
|
(191
|
)
|
|
248
|
|
|
(102
|
)
|
Residential
mortgage-backed
|
|
350
|
|
|
(88
|
)
|
|
1,856
|
|
|
(1,033
|
)
|
Commercial
mortgage-backed
|
|
407
|
|
|
(113
|
)
|
|
1,479
|
|
|
(801
|
)
|
Asset-backed
|
|
1,133
|
|
|
(155
|
)
|
|
1,017
|
|
|
(376
|
)
|
Corporate
– non-U.S.
|
|
458
|
|
|
(81
|
)
|
|
374
|
|
|
(121
|
)
|
Government
– non-U.S.
|
|
187
|
|
|
(5
|
)
|
|
262
|
|
|
(18
|
)
|
U.S.
government and federal agency
|
|
–
|
|
|
–
|
|
|
113
|
|
|
(138
|
)
|
Retained
interests
|
|
1,537
|
|
|
(34
|
)
|
|
421
|
|
|
(74
|
)
|
Equity
|
|
187
|
|
|
(102
|
)
|
|
15
|
|
|
(7
|
)
|
Total
|
$
|
11,978
|
|
$
|
(1,603
|
)
|
$
|
12,215
|
|
$
|
(5,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Of our
residential mortgage-backed securities (RMBS) at March 31, 2009 and December 31,
2008, we had approximately $1,222 million and $1,310 million, respectively, of
exposure to residential subprime credit, primarily supporting our guaranteed
investment contracts, a majority of which have received investment-grade credit
ratings from the major rating agencies. Of the total residential subprime credit
exposure at March 31, 2009 and December 31, 2008, $1,028 million and $1,093
million, respectively, was insured by monoline insurers. Our subprime investment
securities were collateralized primarily by pools of individual, direct mortgage
loans, not other structured products such as collateralized debt obligations.
Additionally, a majority of exposure to residential subprime credit related to
investment securities with underlying loans originated in 2006 and 2005. At
March 31, 2009 and December 31, 2008, we had approximately $2,926 million and
$2,853 million, respectively, of exposure to commercial, regional and foreign
banks, primarily relating to corporate debt securities, with associated
unrealized losses of $730 million and $373 million, respectively.
We
presently intend to hold our investment securities that are in an unrealized
loss position at March 31, 2009, at least until we can recover their respective
amortized cost. In reaching the conclusion that these investments are not
other-than-temporarily impaired, consideration was given to research by our
internal and third-party asset managers. With respect to corporate bonds, we
placed greater emphasis on the credit quality of the issuers. With respect to
RMBS and commercial mortgage-backed securities (CMBS), we placed greater
emphasis on our expectations with respect to cash flows from the underlying
collateral and, with respect to RMBS, we considered the availability of credit
enhancements, principally monoline insurance.
Supplemental
information about gross realized gains and losses on available-for-sale
investment securities follows.
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
GE
|
|
|
|
|
|
|
Gains
|
$
|
–
|
|
$
|
–
|
|
Losses,
including impairments
|
|
(65
|
)
|
|
(4
|
)
|
Net
|
|
(65
|
)
|
|
(4
|
)
|
|
|
|
|
|
|
|
GECS
|
|
|
|
|
|
|
Gains
|
|
24
|
|
|
53
|
|
Losses,
including impairments
|
|
(239
|
)
|
|
(168
|
)
|
Net
|
|
(215
|
)
|
|
(115
|
)
|
Total
|
$
|
(280
|
)
|
$
|
(119
|
)
|
In the
ordinary course of managing our investment securities portfolio, we may sell
securities prior to their maturities for a variety of reasons, including
diversification, credit quality, yield and liquidity requirements and the
funding of claims and obligations to policyholders.
Proceeds
from investment securities sales and early redemptions by the issuer totaled
$2,143 million and $535 million in the first quarters of 2009 and 2008,
respectively, principally from the sales of short-term securities in our bank
subsidiaries.
We
recognized pre-tax gains on trading securities of $40 million and $220 million
in the first quarters of 2009 and 2008, respectively. Investments in retained
interests increased by $87 million and decreased by $75 million during the first
quarters of 2009 and 2008, respectively, reflecting changes in fair value
accounted for in accordance with SFAS 155.
9.
INVENTORIES
Inventories
consisted of the following.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Raw
materials and work in process
|
$
|
8,903
|
|
$
|
8,710
|
|
Finished
goods
|
|
4,888
|
|
|
5,109
|
|
Unbilled
shipments
|
|
732
|
|
|
561
|
|
|
|
14,523
|
|
|
14,380
|
|
Less
revaluation to LIFO
|
|
(692
|
)
|
|
(706
|
)
|
Total
|
$
|
13,831
|
|
$
|
13,674
|
|
10.
GECS FINANCING RECEIVABLES
GECS
financing receivables – net, consisted of the following.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Loans,
net of deferred income
|
$
|
299,067
|
|
$
|
310,203
|
|
Investment
in financing leases, net of deferred income
|
|
61,683
|
|
|
67,578
|
|
|
|
360,750
|
|
|
377,781
|
|
Less
allowance for losses (Note 11)
|
|
(5,714
|
)
|
|
(5,325
|
)
|
Financing
receivables – net(a)
|
$
|
355,036
|
|
$
|
372,456
|
|
|
|
|
|
|
|
|
(a)
|
Included
$5,538 million and $6,461 million related to consolidated, liquidating
securitization entities at March 31, 2009, and December 31, 2008,
respectively. In addition, financing receivables at March 31, 2009 and
December 31, 2008, included $2,877 million and $2,736 million,
respectively, relating to loans that had been acquired and accounted for
in accordance with SOP 03-3, Accounting for Certain Loans
or Debt Securities Acquired in a
Transfer.
|
We
adopted SFAS 141(R) on January 1, 2009. As a result of this adoption, 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 GECS financing receivables – net
follow.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Commercial Lending and Leasing
(CLL)(a)
|
|
|
|
|
|
|
Americas
|
$
|
100,985
|
|
$
|
105,410
|
|
Europe
|
|
41,208
|
|
|
37,767
|
|
Asia
|
|
14,528
|
|
|
16,683
|
|
Other
|
|
764
|
|
|
786
|
|
|
|
157,485
|
|
|
160,646
|
|
|
|
|
|
|
|
|
Consumer (formerly GE
Money)(a)
|
|
|
|
|
|
|
Non-U.S.
residential mortgages(b)
|
|
56,974
|
|
|
60,753
|
|
Non-U.S.
installment and revolving credit
|
|
22,256
|
|
|
24,441
|
|
U.S.
installment and revolving credit
|
|
25,286
|
|
|
27,645
|
|
Non-U.S.
auto
|
|
15,343
|
|
|
18,168
|
|
Other
|
|
10,309
|
|
|
11,541
|
|
|
|
130,168
|
|
|
142,548
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
45,373
|
|
|
46,735
|
|
|
|
|
|
|
|
|
Energy
Financial Services
|
|
8,360
|
|
|
8,392
|
|
|
|
|
|
|
|
|
GE Commercial Aviation Services
(GECAS)(c)
|
|
15,501
|
|
|
15,429
|
|
|
|
|
|
|
|
|
Other(d)
|
|
3,863
|
|
|
4,031
|
|
|
|
360,750
|
|
|
377,781
|
|
Less
allowance for losses
|
|
(5,714
|
)
|
|
(5,325
|
)
|
Total
|
$
|
355,036
|
|
$
|
372,456
|
|
|
|
|
|
|
|
|
(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.
|
(b)
|
At
March 31, 2009, net of credit insurance, approximately 27% 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 the origination date, loans with an
adjustable rate were underwritten to the reset value.
|
(c)
|
Included
loans and financing leases of $13,189 million and $13,078 million at March
31, 2009, and December 31, 2008, respectively, related to commercial
aircraft at Aviation Financial Services.
|
(d)
|
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 follows.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Loans
requiring allowance for losses
|
$
|
4,138
|
|
$
|
2,712
|
|
Loans
expected to be fully recoverable
|
|
1,682
|
|
|
871
|
|
Total
impaired loans
|
$
|
5,820
|
|
$
|
3,583
|
|
|
|
|
|
|
|
|
Allowance
for losses
|
$
|
908
|
|
$
|
635
|
|
Average
investment during the period
|
|
4,665
|
|
|
2,064
|
|
Interest
income earned while impaired(a)
|
|
17
|
|
|
27
|
|
|
|
|
|
|
|
|
(a)
|
Recognized
principally on cash basis.
|
11.
GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
(In
millions)
|
Balance
January
1,
2009
|
|
Provision
charged
to
operations
|
|
Currency
exchange
|
|
Other
|
|
Gross
write-offs
|
|
Recoveries
|
|
Balance
March
31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
843
|
|
$
|
271
|
|
$
|
(1
|
)
|
$
|
(8
|
)
|
$
|
(201
|
)
|
$
|
16
|
|
$
|
920
|
|
Europe
|
|
288
|
|
|
106
|
|
|
(10
|
)
|
|
(1
|
)
|
|
(59
|
)
|
|
3
|
|
|
327
|
|
Asia
|
|
163
|
|
|
50
|
|
|
(18
|
)
|
|
7
|
|
|
(28
|
)
|
|
4
|
|
|
178
|
|
Other
|
|
2
|
|
|
–
|
|
|
–
|
|
|
2
|
|
|
–
|
|
|
–
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
383
|
|
|
237
|
|
|
(41
|
)
|
|
4
|
|
|
(81
|
)
|
|
24
|
|
|
526
|
|
Non-U.S.
installment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
revolving credit
|
|
1,051
|
|
|
433
|
|
|
(62
|
)
|
|
12
|
|
|
(493
|
)
|
|
97
|
|
|
1,038
|
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
1,700
|
|
|
905
|
|
|
–
|
|
|
(229
|
)
|
|
(695
|
)
|
|
37
|
|
|
1,718
|
|
Non-U.S.
auto
|
|
222
|
|
|
128
|
|
|
(12
|
)
|
|
19
|
|
|
(160
|
)
|
|
52
|
|
|
249
|
|
Other
|
|
226
|
|
|
73
|
|
|
(11
|
)
|
|
(23
|
)
|
|
(77
|
)
|
|
11
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
301
|
|
|
110
|
|
|
(6
|
)
|
|
–
|
|
|
(9
|
)
|
|
–
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
58
|
|
|
10
|
|
|
–
|
|
|
(2
|
)
|
|
–
|
|
|
–
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
60
|
|
|
–
|
|
|
–
|
|
|
1
|
|
|
–
|
|
|
–
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
28
|
|
|
13
|
|
|
–
|
|
|
1
|
|
|
(10
|
)
|
|
–
|
|
|
32
|
|
Total
|
$
|
5,325
|
|
$
|
2,336
|
|
$
|
(161
|
)
|
$
|
(217
|
)
|
$
|
(1,813
|
)
|
$
|
244
|
|
$
|
5,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Other
primarily included the effects of securitization
activity.
|
(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.
|
(In
millions)
|
Balance
January
1,
2008
|
|
Provision
charged
to
operations
|
|
Currency
exchange
|
|
Other
|
|
Gross
write-offs
|
|
Recoveries
|
|
Balance
March
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
471
|
|
$
|
97
|
|
$
|
1
|
|
$
|
73
|
|
$
|
(59
|
)
|
$
|
14
|
|
$
|
597
|
|
Europe
|
|
232
|
|
|
39
|
|
|
13
|
|
|
(38
|
)
|
|
(34
|
)
|
|
6
|
|
|
218
|
|
Asia
|
|
226
|
|
|
19
|
|
|
15
|
|
|
42
|
|
|
(187
|
)
|
|
2
|
|
|
117
|
|
Other
|
|
3
|
|
|
–
|
|
|
1
|
|
|
(1
|
)
|
|
–
|
|
|
–
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
246
|
|
|
31
|
|
|
10
|
|
|
1
|
|
|
(27
|
)
|
|
20
|
|
|
281
|
|
Non-U.S.
installment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
revolving credit
|
|
1,371
|
|
|
429
|
|
|
78
|
|
|
(1
|
)
|
|
(617
|
)
|
|
200
|
|
|
1,460
|
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
985
|
|
|
585
|
|
|
–
|
|
|
(161
|
)
|
|
(505
|
)
|
|
61
|
|
|
965
|
|
Non-U.S.
auto
|
|
324
|
|
|
73
|
|
|
7
|
|
|
(39
|
)
|
|
(150
|
)
|
|
77
|
|
|
292
|
|
Other
|
|
167
|
|
|
54
|
|
|
14
|
|
|
–
|
|
|
(69
|
)
|
|
17
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
168
|
|
|
(1
|
)
|
|
2
|
|
|
15
|
|
|
(4
|
)
|
|
–
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
19
|
|
|
1
|
|
|
–
|
|
|
2
|
|
|
–
|
|
|
–
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
8
|
|
|
16
|
|
|
–
|
|
|
–
|
|
|
(1
|
)
|
|
–
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
18
|
|
|
–
|
|
|
–
|
|
|
1
|
|
|
(5
|
)
|
|
–
|
|
|
14
|
|
Total
|
$
|
4,238
|
|
$
|
1,343
|
|
$
|
141
|
|
$
|
(106
|
)
|
$
|
(1,658
|
)
|
$
|
397
|
|
$
|
4,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Other
primarily included the effects of securitization activity, 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.
|
12.
PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment (including equipment leased to others) – net, consisted of
the following.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Original
cost
|
$
|
116,171
|
|
$
|
125,671
|
|
Less
accumulated depreciation and amortization
|
|
(43,949
|
)
|
|
(47,141
|
)
|
Property,
plant and equipment (including equipment leased to others) –
net
|
$
|
72,222
|
|
$
|
78,530
|
|
13.
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
and other intangible assets – net, consisted of the following.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
80,640
|
|
$
|
81,759
|
|
|
|
|
|
|
|
|
Other
intangible assets
|
|
|
|
|
|
|
Intangible
assets subject to amortization
|
$
|
12,404
|
|
$
|
12,623
|
|
Indefinite-lived
intangible assets(a)
|
|
2,354
|
|
|
2,354
|
|
Total
|
$
|
14,758
|
|
$
|
14,977
|
|
|
|
|
|
|
|
|
(a)
|
Indefinite-lived
intangible assets principally comprised trademarks, tradenames and U.S.
Federal Communications Commission
licenses.
|
Changes
in goodwill balances follow.
(In
millions)
|
Balance
January
1,
2009
|
|
Acquisitions/
acquisition
accounting
adjustments
|
|
Dispositions,
currency
exchange
and
other
|
|
Balance
March
31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Infrastructure
|
$
|
9,943
|
|
$
|
(152
|
)
|
$
|
(229
|
)
|
$
|
9,562
|
|
Technology
Infrastructure
|
|
26,684
|
|
|
383
|
|
|
(170
|
)
|
|
26,897
|
|
NBC
Universal
|
|
18,973
|
|
|
1
|
|
|
(3
|
)
|
|
18,971
|
|
Capital
Finance
|
|
25,365
|
|
|
210
|
|
|
(1,138
|
)
|
|
24,437
|
|
Consumer
& Industrial
|
|
794
|
|
|
–
|
|
|
(21
|
)
|
|
773
|
|
Total
|
$
|
81,759
|
|
$
|
442
|
|
$
|
(1,561
|
)
|
$
|
80,640
|
|
The
amount of goodwill related to new acquisitions recorded during the first quarter
of 2009 was $462 million and related to acquisitions of Airfoils Technologies
International – Singapore Pte. Ltd. (ATI-Singapore) ($337 million) at Technology
Infrastructure and Interbanca S.p.A. (Interbanca) ($125 million) at Capital
Finance. During the first quarter of 2009, the goodwill balance decreased by $20
million related to acquisition accounting adjustments to prior-year
acquisitions. The most significant of these adjustments was a decrease of $139
million associated with the 2008 acquisition of Hydril Pressure Control by
Energy Infrastructure, partially offset by an increase of $70 million associated
with the 2008 acquisition of CitiCapital at Capital Finance. Also during the
first quarter of 2009, goodwill balances decreased $1,561 million, primarily as
a result of the stronger U.S. dollar ($893 million) and the deconsolidation of
PTL at Capital Finance ($634 million).
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. As required by SFAS 141(R), we remeasured our previous
equity interests to fair value, resulting in a pre-tax gain of $254 million
which is reported in other income.
We test
goodwill for impairment annually and more frequently if circumstances warrant.
Given the significant decline in our stock price in the first quarter of 2009
and current market conditions in the financial services industry, we conducted
an additional impairment analysis of the Capital Finance reporting units during
the first quarter of 2009 using data as of December 31, 2008. Reporting units
within Capital Finance are CLL, Consumer, Real Estate, Energy Financial Services
and GECAS, which had goodwill balances of $12,029 million, $8,995 million,
$1,140 million, $2,119 million and $154 million, respectively, at March 31,
2009.
We
determined fair values for each of the Capital Finance reporting units using an
income approach. When available and as appropriate, we used comparative market
multiples to corroborate discounted cash flow results. For purposes of the
income approach, fair value was 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 used discount rates
that are commensurate with the risks and uncertainty inherent in the financial
markets generally and in our internally developed forecasts. Discount rates used
in these reporting unit valuations ranged from 11.5% to 13.0%. Valuations using
the market approach reflect prices and other relevant observable information
generated by market transactions involving financial services
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.
In
performing the valuations, we updated cash flows to reflect management’s
forecasts and adjusted discount rates to reflect the risks associated with the
current market. Based on the results of our testing, the fair values of these
reporting units exceeded their book values; therefore, the second step of the
impairment test (in which fair value of each of the reporting units assets and
liabilities are measured) was not required to be performed and no goodwill
impairment was recognized. 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, future business plans, economic
projections and market data. Actual results may differ from forecasted results.
While no impairment was noted in our step one impairment tests, goodwill in our
Real Estate reporting unit may be particularly sensitive to further
deterioration in economic conditions. 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
|
|
|
March
31, 2009
|
|
December
31, 2008
|
|
(In
millions)
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related
|
$
|
6,721
|
|
$
|
(1,881
|
)
|
$
|
4,840
|
|
$
|
6,341
|
|
$
|
(1,516
|
)
|
$
|
4,825
|
|
Patents,
licenses and trademarks
|
|
5,318
|
|
|
(2,169
|
)
|
|
3,149
|
|
|
5,315
|
|
|
(2,150
|
)
|
|
3,165
|
|
Capitalized
software
|
|
6,968
|
|
|
(4,346
|
)
|
|
2,622
|
|
|
6,872
|
|
|
(4,199
|
)
|
|
2,673
|
|
Lease
valuations
|
|
1,716
|
|
|
(650
|
)
|
|
1,066
|
|
|
1,761
|
|
|
(594
|
)
|
|
1,167
|
|
Present
value of future profits
|
|
869
|
|
|
(444
|
)
|
|
425
|
|
|
869
|
|
|
(439
|
)
|
|
430
|
|
All
other
|
|
644
|
|
|
(342
|
)
|
|
302
|
|
|
680
|
|
|
(317
|
)
|
|
363
|
|
Total
|
$
|
22,236
|
|
$
|
(9,832
|
)
|
$
|
12,404
|
|
$
|
21,838
|
|
$
|
(9,215
|
)
|
$
|
12,623
|
|
Consolidated
amortization related to intangible assets subject to amortization was $460
million and $529 million for the quarters ended March 31, 2009 and 2008,
respectively.
14.
GECS BORROWINGS
GECS
borrowings are summarized in the following table.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
paper
|
|
|
|
|
|
|
U.S.
|
|
|
|
|
|
|
Unsecured(a)
|
$
|
49,755
|
|
$
|
62,768
|
|
Asset-backed(b)
|
|
3,518
|
|
|
3,652
|
|
Non-U.S.
|
|
7,772
|
|
|
9,033
|
|
Current
portion of long-term debt(a)(c)
|
|
79,018
|
|
|
69,682
|
|
Bank
deposits(d)(e)
|
|
25,770
|
|
|
29,634
|
|
Bank
borrowings(f)
|
|
2,462
|
|
|
10,028
|
|
GE
Interest Plus notes(g)
|
|
5,049
|
|
|
5,633
|
|
Other
|
|
2,332
|
|
|
3,103
|
|
Total
|
|
175,676
|
|
|
193,533
|
|
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
notes
|
|
|
|
|
|
|
Unsecured(a)
|
|
295,295
|
|
|
299,186
|
|
Asset-backed(h)
|
|
4,518
|
|
|
5,002
|
|
Subordinated
notes(i)
|
|
2,739
|
|
|
2,866
|
|
Subordinated
debentures(j)
|
|
7,056
|
|
|
7,315
|
|
Bank
deposits(k)
|
|
7,804
|
|
|
6,699
|
|
Total
|
|
317,412
|
|
|
321,068
|
|
Total
borrowings
|
$
|
493,088
|
|
$
|
514,601
|
|
|
|
|
|
|
|
|
(a)
|
GE
Capital had issued and outstanding, $73,990 million ($36,965 million
commercial paper and $37,025 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 March 31, 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 debt that is guaranteed by the
FDIC.
|
(b)
|
Consists
entirely of obligations of consolidated, liquidating securitization
entities. See Note 10.
|
(c)
|
Included
$283 million and $326 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at March 31, 2009, and
December 31, 2008, respectively.
|
(d)
|
Included
$12,352 million and $11,793 million of deposits in non-U.S. banks at March
31, 2009, and December 31, 2008, respectively.
|
(e)
|
Included
certificates of deposits distributed by brokers of $13,418 million and
$17,841 million at March 31, 2009, and December 31, 2008,
respectively.
|
(f)
|
Term
borrowings from banks with a remaining term to maturity of less than 12
months.
|
(g)
|
Entirely
variable denomination floating rate demand notes.
|
(h)
|
Included
$1,422 million and $2,104 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at March 31, 2009, and
December 31, 2008, respectively. See Note 10.
|
(i)
|
Included
$750 million of subordinated notes guaranteed by GE at March 31, 2009, and
December 31, 2008.
|
(j)
|
Subordinated
debentures receive rating agency equity credit and were hedged at issuance
to the U.S. dollar equivalent of $7,725 million.
|
(k)
|
Entirely
certificates of deposits distributed by brokers with maturities greater
than one year.
|
15.
FAIR VALUE MEASUREMENTS
Effective
January 1, 2008, we adopted SFAS 157, Fair Value Measurements, for
all financial instruments and non-financial instruments accounted for at fair
value on a recurring basis. Effective January 1, 2009, we adopted SFAS 157 for
all non-financial instruments accounted for at fair value on a non-recurring
basis. SFAS 157 establishes a new framework for measuring fair value and expands
related disclosures. Broadly, the SFAS 157 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. SFAS 157 establishes a three-level valuation hierarchy
based upon observable and non-observable inputs.
The
following describes the valuation methodologies we use to measure non-financial
instruments accounted for at fair value on a non-recurring basis. For valuation
methodologies relating to financial instruments and non-financial instruments
accounted for at fair value on a recurring basis and financial instruments
accounted for on a non-recurring basis, see Note 28 to the consolidated
financial statements in our 2008 Form 10-K.
Investments
in subsidiaries and formerly consolidated subsidiaries
Upon a
change in control that results in consolidation or deconsolidation of a
subsidiary, a fair value measurement may be required if we held a noncontrolling
investment in the entity and obtain control or 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.
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.
The
following tables present our assets and liabilities measured at fair value on a
recurring basis. Included in the tables are investment securities of $21,501
million and $21,967 million at March 31, 2009 and December 31, 2008,
respectively, primarily supporting obligations to annuitants and policyholders
in our run-off insurance operations, and $7,790 million and $8,190 million at
March 31, 2009 and December 31, 2008, respectively, supporting obligations to
holders of guaranteed investment contracts. Such securities are mainly
investment grade. Also included are retained interests in securitizations
totaling $6,444 million and $6,356 million at March 31, 2009 and December 31,
2008, respectively.
(a)
|
FASB
Interpretation (FIN) 39, Offsetting of Amounts Related
to Certain Contracts, permits the netting of derivative receivables
and payables 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 March 31, 2009 and December 31, 2008, the cumulative adjustment was a
gain of $187 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 accounted for in accordance with EITF Issue
97-14, Accounting for
Deferred Compensation Arrangements Where Amounts Earned Are Held in a
Rabbi Trust and Invested.
|
The
following tables present the changes in Level 3 instruments measured on a
recurring basis for the three months ended March 31, 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 equity.
Changes
in Level 3 instruments for the three months ended March 31, 2009
|
January
1,
2009
|
|
Net
realized/
unrealized
gains
(losses)
included
in
earnings
|
|
Net
realized/
unrealized
gains
(losses)
included
in
accumulated
other
comprehensive
income
|
|
Purchases,
issuances
and
settlements
|
|
Transfers
in
and/or
out
of
Level
3
|
|
March
31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,956
|
|
$
|
244
|
|
$
|
(301
|
)
|
$
|
(303
|
)
|
$
|
(690
|
)
|
$
|
11,906
|
|
|
$
|
111
|
|
|
|
1,003
|
|
|
24
|
|
|
(43
|
|
|
(63
|
|
|
|
|
|
926
|
|
|
|
(14
|
|
|
|
1,105
|
|
|
(28
|
|
|
(17
|
|
|
(5
|
|
|
|
|
|
1,062
|
|
|
|
(43
|
|
|
|
15,064
|
|
|
240
|
|
|
(361
|
|
|
(371
|
|
|
|
|
|
13,894
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $30 million in losses from
related derivatives included in Level 2 and $10 million in losses from
qualifying fair value hedges.
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $56 million not reflected in the fair value hierarchy
table.
|
Changes
in Level 3 instruments for the three months ended March 31, 2008
|
January
1,
2008
|
|
Net
realized/
unrealized
gains
(losses)
included
in
earnings
|
|
Net
realized/
unrealized
gains
(losses)
included
in
accumulated
other
comprehensive
income
|
|
Purchases,
issuances
and
settlements
|
|
Transfers
in
and/or
out
of
Level
3
|
|
March
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,447
|
|
$
|
83
|
|
$
|
(188
|
)
|
$
|
377
|
|
$
|
–
|
|
$
|
12,719
|
|
|
$
|
(38
|
)
|
|
|
265
|
|
|
507
|
|
|
54
|
|
|
(51
|
|
|
|
|
|
775
|
|
|
|
484
|
|
|
|
1,330
|
|
|
(27
|
|
|
33
|
|
|
19
|
|
|
|
|
|
1,355
|
|
|
|
(13
|
|
|
|
14,042
|
|
|
563
|
|
|
(101
|
|
|
345
|
|
|
|
|
|
14,849
|
|
|
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. No transfers occurred during the first quarter of
2008.
|
(c)
|
Represented
the amount of unrealized gains or losses for the period included in
earnings.
|
(d)
|
Earnings
from Derivatives were more than offset by $380 million in losses from
related derivatives included in Level 2 and $148 million in losses from
qualifying fair value hedges.
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $11 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. Included in this category are 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, the remeasurement of retained investments in
former consolidated subsidiaries, and the remeasurement of previous equity
interests upon acquisition of a controlling interest. At March 31, 2009 and
December 31, 2008, these assets totaled $240 million and $48 million, identified
as Level 2, and $10,770 million and $3,145 million, identified as Level 3,
respectively.
The
following table represents the fair value adjustments to assets still held at
March 31, 2009 and March 31, 2008.
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Financing
receivables and loans held for sale
|
$
|
(324
|
)
|
$
|
(155
|
)
|
Cost
and equity method investments
|
|
(227
|
)
|
|
(69
|
)
|
Long-lived
assets(a)
|
|
(136
|
)
|
|
(28
|
)
|
Retained
investments in formerly consolidated subsidiaries(a)
|
|
226
|
|
|
–
|
|
Previous
equity interests of newly controlled subsidiaries(a)
|
|
254
|
|
|
–
|
|
Total
|
$
|
(207
|
)
|
$
|
(252
|
)
|
|
|
|
|
|
|
|
(a)
|
SFAS
157 was adopted for non-financial assets valued on a non-recurring basis
as of January 1, 2009.
|
16.
DERIVATIVES AND HEDGING
On
January 1, 2009, we adopted SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No.
133. The standard supplements the required disclosures provided under
SFAS 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, with
additional qualitative and quantitative information. Accordingly, the
disclosures that follow should be read in the context of our existing disclosure
in Note 29 to the consolidated financial statements in our 2008 Form
10-K.
We use
derivatives for risk management purposes. As a matter of policy, 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
ensuring 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 execute derivatives to adjust the
nature and tenor of debt funding to meet this objective. The determination of
whether a derivative is necessary to achieve this objective depends on customer
needs for specific types of financing and market factors affecting the type of
debt we can issue.
Of the
outstanding notional amount of $373,000 million, approximately 95%, or $355,000
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 in accordance with SFAS 133, 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 where 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 under SFAS 133 and those
that are not.
|
At
March 31, 2009
|
|
|
Fair
value
|
|
(In
millions)
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivatives
accounted for as hedges under SFAS 133
|
|
|
|
|
|
|
Interest
rate contracts
|
$
|
7,895
|
|
$
|
4,316
|
|
Currency
exchange contracts
|
|
5,496
|
|
|
3,360
|
|
Other
contracts
|
|
71
|
|
|
35
|
|
|
|
13,462
|
|
|
7,711
|
|
|
|
|
|
|
|
|
Derivatives
not accounted for as hedges under SFAS 133
|
|
|
|
|
|
|
Interest
rate contracts
|
|
1,743
|
|
|
1,798
|
|
Currency
exchange contracts
|
|
2,036
|
|
|
1,431
|
|
Other
contracts
|
|
253
|
|
|
368
|
|
|
|
4,032
|
|
|
3,597
|
|
FIN 39 netting
adjustment(a)
|
|
(6,651
|
)
|
|
(6,838
|
)
|
|
|
|
|
|
|
|
Total
|
$
|
10,843
|
|
$
|
4,470
|
|
|
|
|
|
|
|
|
Derivatives
are classified in the captions “All other assets” and “All other
liabilities” in our financial statements.
|
(a)
|
FIN
39 permits the netting of derivative receivables and payables when a
legally enforceable master netting agreement exists. Amounts included fair
value adjustments related to our own and counterparty credit risk. At
March 31, 2009 and December 31, 2008, the cumulative adjustment for
non-performance risk was a gain of $187 million and $177 million,
respectively.
|
Earnings
effects of derivatives on the Statement of Earnings
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
March 31, 2009, such adjustments increased the carrying amount of debt
outstanding by $7,181 million. The following table provides information about
the earnings effects of our fair value hedging relationships for the three
months ended March 31, 2009.
|
|
|
Three
months ended
March
31, 2009
|
|
(In
millions)
|
Financial
statement caption
|
|
Gain
(loss)
on
hedging
derivatives
|
|
Gain
(loss)
on
hedged
items
|
|
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
Interest
and other financial charges
|
|
$
|
(937
|
)
|
$
|
986
|
|
Currency
exchange contracts
|
Interest
and other financial charges
|
|
|
(967
|
)
|
|
949
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedges resulted in $31 million of ineffectiveness of which $(27) million
reflects amounts excluded from the assessment of effectiveness.
For
derivatives that are designated in a cash flow hedging relationship, the
effective portion of the change in fair value of the derivative is reported in
the cash flow hedges subaccount of accumulated other comprehensive income (AOCI)
and reclassified into earnings contemporaneously with the earnings effects of
the hedged transaction. Earnings effects of the derivative and the hedged item
are reported in the same caption in the Statement of Earnings. Hedge
ineffectiveness and components of changes in fair value of the derivative that
are excluded from the assessment of effectiveness are recognized in earnings
each reporting period.
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
months ended March 31, 2009.
(In
millions)
|
Gain
(loss)
recognized
in
OCI
|
|
Financial
statement caption
|
|
Gain
(loss)
reclassified
from
AOCI
into
earnings
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
|
|
|
|
|
|
Interest
rate contracts
|
$
|
99
|
|
Interest
and other financial charges
|
|
$
|
(486
|
)
|
Currency
exchange contracts
|
|
525
|
|
Other
costs and expenses
|
|
|
(77
|
)
|
|
|
|
|
Interest
and other financial charges
|
|
|
(3
|
)
|
|
|
|
|
GECS
revenues from services
|
|
|
(269
|
)
|
|
|
|
|
Sales
of goods and services
|
|
|
3
|
|
Commodity
contracts
|
|
5
|
|
Other
costs and expenses
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
629
|
|
|
|
$
|
(840
|
)
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss)
recognized
in
CTA
|
|
|
|
Gain
(loss)
reclassified
from
CTA
|
|
Net
investment hedges
|
|
|
|
|
|
|
|
|
Currency
exchange contracts
|
$
|
2,355
|
|
GECS
revenues from services
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
Of the
total pre-tax amount recorded in AOCI, $4,309 million related to cash flow
hedges of forecasted transactions of which we expect to transfer $2,078 million
to earnings as an expense in the next 12 months contemporaneously with the
earnings effects of the related forecasted transactions. In the first quarter 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 March 31, 2009, the maximum term of derivative
instruments that hedge forecasted transactions was 27 years and related to
hedges of anticipated interest payments associated with external
debt.
For cash
flow hedges, the amount of ineffectiveness in the hedging relationship and
amount of the changes in fair value of the derivative that are not included in
the measurement of ineffectiveness are both reflected in earnings each reporting
period. These amounts totaled $(7) million for the three months ended March 31,
2009, and primarily appear in GECS revenues from services. Ineffectiveness from
net investment hedges was $(390) million, which primarily relates to changes in
value of the forward points that under our hedge accounting designations are
excluded from the assessment of effectiveness and recorded directly into
earnings. These amounts appear in the “Interest and other financial charges”
caption in the Statement of Earnings.
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.
Losses for the first quarter of 2009 on derivatives not designated as hedges,
without considering the offsetting earnings effects from the item representing
the economic risk exposure, were $(1) million, related to interest rate
contracts of $157 million, currency exchange contracts of $(172) million and
equity, credit and commodity derivatives of $14 million.
Counterparty
credit risk
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 $3,016 million at March 31, 2009.
In addition to these provisions, we also have collateral arrangements that
provide us with the right to hold collateral (cash or U.S. Treasury 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 March 31, 2009 was approximately
$8,253 million, of which $131 million was held in cash and $8,122 million
represented pledged securities. The fair value of collateral posted by us was
approximately $1,021 million, of which $34 million was cash and $987 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.
Guarantees
of derivatives
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 $30 million at March 31, 2009. The aggregate fair value of
customer derivative contracts in a liability position at March 31, 2009, was
$363 million before consideration of any offsetting effect of collateral. At
March 31, 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.
17.
SHAREOWNERS’ EQUITY
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 March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Net
earnings attributable to the Company
|
$
|
2,811
|
|
$
|
4,304
|
|
Investment
securities – net
|
|
(635
|
)
|
|
(742
|
)
|
Currency
translation adjustments – net
|
|
(4,060
|
)
|
|
2,176
|
|
Cash
flow hedges – net
|
|
717
|
|
|
(1,617
|
)
|
Benefit
plans – net
|
|
239
|
|
|
110
|
|
Total
|
$
|
(928
|
)
|
$
|
4,231
|
|
Changes
to noncontrolling interests during the first quarter of 2009 resulted from net
earnings ($85 million), dividends ($(223) million), the effects of
deconsolidating PTL ($(331) million), accumulated other comprehensive income
($(30) million) and other ($9 million). Changes to the individual components of
accumulated other comprehensive income attributable to noncontrolling interests
were insignificant.
18.
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 three months
ended March 31, 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
March 31, 2009 and December 31, 2008 follow:
|
At
|
|
|
March
31, 2009
|
|
December
31, 2008
|
|
(In
millions)
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated,
liquidating securitization entities(a)
|
$
|
3,813
|
|
$
|
3,665
|
|
$
|
4,000
|
|
$
|
3,868
|
|
Trinity(b)
|
|
8,348
|
|
|
10,747
|
|
|
9,192
|
|
|
11,623
|
|
Penske
Truck Leasing Co., L.P. (PTL)(c)
|
|
–
|
|
|
–
|
|
|
7,444
|
|
|
1,339
|
|
Other(d)
|
|
5,212
|
|
|
3,712
|
|
|
5,990
|
|
|
4,426
|
|
|
$
|
17,373
|
|
$
|
18,124
|
|
$
|
26,626
|
|
$
|
21,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $3,420
million at March 31, 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 $3,224 million to such entities as of
March 31, 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)
|
The
remaining assets and liabilities of VIEs that are included in our
consolidated financial statements were acquired in transactions subsequent
to adoption of FIN 46(R) on 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. There are
no recourse arrangements between GE and 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 March 31, 2009 and December 31, 2008
follow:
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Other
assets(a)
|
$
|
8,300
|
|
$
|
1,897
|
|
Financing
receivables
|
|
642
|
|
|
974
|
|
Total
investment
|
|
8,942
|
|
|
2,871
|
|
Contractual
obligations to fund new investments
|
|
1,460
|
|
|
1,159
|
|
Maximum
exposure to loss
|
$
|
10,402
|
|
$
|
4,030
|
|
|
|
|
|
|
|
|
(a)
|
At
March 31, 2009, our remaining investment in PTL of $6,108 million
comprised a 49.9% partnership interest of $935 million and loans and
advances of $5,173 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 8.
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.
Financing
receivables transferred to securitization entities that remained outstanding and
our retained interests in those financing receivables at March 31, 2009 and
December 31, 2008 follow.
(In
millions)
|
Equipment
|
(a)(b)
|
Commercial
real
estate
|
(b)
|
Credit
card
receivables
|
|
Other
assets
|
(b)
|
Total
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
amount outstanding
|
$
|
13,365
|
|
$
|
7,758
|
|
$
|
23,049
|
|
$
|
4,627
|
|
$
|
48,799
|
|
Included
within the amount above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
are
retained interests of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
receivables(c)
|
|
1,104
|
|
|
–
|
|
|
2,364
|
|
|
–
|
|
|
3,468
|
|
Investment
securities
|
|
679
|
|
|
251
|
|
|
5,179
|
|
|
293
|
|
|
6,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(c)
|
|
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 March 31, 2009 and December 31, 2008, liquidity support
totaled $2,122 million and $2,143 million, respectively. Credit support
totaled $2,146 million and $2,164 million at March 31, 2009 and December
31, 2008, respectively.
|
(c)
|
Uncertificated
seller’s interests.
|
Retained
Interests in Securitization Transactions
When we
transfer financing receivables, we determine the fair value of retained
interests received as part of the securitization transaction in accordance with
SFAS 157. Further information about how fair value is determined is presented in
Note 15. 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 March 31,
2009 and December 31, 2008 follow.
(In
millions)
|
Equipment
|
|
Commercial
real
estate
|
|
Credit
card
receivables
|
|
Other
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate(a)
|
|
13.9
|
%
|
|
22.7
|
%
|
|
13.9
|
%
|
|
10.7
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(12
|
)
|
$
|
(13
|
)
|
$
|
(56
|
)
|
$
|
(1
|
)
|
20%
adverse change
|
|
(24
|
)
|
|
(26
|
)
|
|
(110
|
)
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment
rate(a)(b)
|
|
19.0
|
%
|
|
11.9
|
%
|
|
9.2
|
%
|
|
52.9
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(4
|
)
|
$
|
(2
|
)
|
$
|
(82
|
)
|
$
|
–
|
|
20%
adverse change
|
|
(8
|
)
|
|
(3
|
)
|
|
(157
|
)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimate
of credit losses(a)
|
|
1.0
|
%
|
|
2.0
|
%
|
|
13.9
|
%
|
|
–
|
%
|
Effect
of
|
|
|
|
|
|
|
|
|
|
|
|
|
10%
adverse change
|
$
|
(4
|
)
|
$
|
(2
|
)
|
$
|
(189
|
)
|
$
|
–
|
|
20%
adverse change
|
|
(9
|
)
|
|
(4
|
)
|
|
(371
|
)
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
lives (in months)
|
|
10
|
|
|
54
|
|
|
10
|
|
|
4
|
|
Net
credit losses for the quarter
|
$
|
37
|
|
$
|
3
|
|
$
|
446
|
|
$
|
2
|
|
Delinquencies
|
|
126
|
|
|
97
|
|
|
1,326
|
|
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
1
|
|
$
|
1,512
|
|
$
|
5
|
|
Delinquencies
|
|
139
|
|
|
56
|
|
|
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).
|
Activity
related to retained interests classified as investment securities in our
consolidated financial statements for the three months ended March 31, 2009 and
2008 follows.
|
Three
months ended March 31
|
|
(in
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Cash
flows on transfers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from new transfers
|
$
|
–
|
|
$
|
1,323
|
|
Proceeds
from collections reinvested in revolving period transfers
|
|
16,088
|
|
|
19,435
|
|
Cash
flows on retained interests recorded as investment
securities
|
|
1,598
|
|
|
1,486
|
|
|
|
|
|
|
|
|
Effect
on GECS revenues from services
|
|
|
|
|
|
|
Net
gain on sale
|
$
|
326
|
|
$
|
386
|
|
Change
in fair value on SFAS 155 retained interests
|
|
87
|
|
|
(75
|
)
|
Other-than-temporary
impairments
|
|
(31
|
)
|
|
(110
|
)
|
Derivative
activities
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. At March 31, 2009, the fair value of
such derivative contracts was $692 million, ($752 million at December 31, 2008).
We have no other derivatives arrangements with QSPEs or other VIEs.
Servicing
activities
The
amount of our servicing assets and liabilities was insignificant at March 31,
2009 and December 31, 2008. We received servicing fees from QSPEs of $155
million and $164 million, respectively, for the three months ended
March 31, 2009 and 2008.
At March
31, 2009 and December 31, 2008, accounts payables included $4,069 million and
$4,446 million, respectively, representing obligations to QSPEs for collections
received in our capacity as servicer from obligors of QSPEs.
Included
in other GECS receivables at March 31, 2009 and December 31, 2008, were $2,564
million and $2,346 million, respectively, relating to amounts owed by QSPEs to
GE, principally for the purchase of financial assets.
19.
INTERCOMPANY TRANSACTIONS
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividend 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.
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) operating activities –
|
|
|
|
|
|
|
continuing
operations
|
$
|
(635
|
)
|
$
|
8,189
|
|
Elimination
of GECS dividend to GE
|
|
–
|
|
|
(1,130
|
)
|
Net
increase in GE customer receivables sold to GECS
|
|
(377
|
)
|
|
(564
|
)
|
Other
reclassifications and eliminations
|
|
593
|
|
|
63
|
|
Consolidated
cash from (used for) operating activities – continuing
operations
|
$
|
(419
|
)
|
$
|
6,558
|
|
|
|
|
|
|
|
|
Investing
|
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) investing activities –
|
|
|
|
|
|
|
continuing
operations
|
$
|
6,858
|
|
$
|
(21,746
|
)
|
Net
increase in GE customer receivables sold to GECS
|
|
377
|
|
|
564
|
|
Capital
contribution from GE to GECS
|
|
9,500
|
|
|
–
|
|
Other
reclassifications and eliminations
|
|
(886
|
)
|
|
(142
|
)
|
Consolidated
cash from (used for) investing activities – continuing
operations
|
$
|
15,849
|
|
$
|
(21,324
|
)
|
|
|
|
|
|
|
|
Financing
|
|
|
|
|
|
|
Sum
of GE and GECS cash from (used for) financing activities –
|
|
|
|
|
|
|
continuing
operations
|
$
|
(8,432
|
)
|
$
|
13,314
|
|
Elimination
of short-term intercompany borrowings(a)
|
|
1,242
|
|
|
17
|
|
Elimination
of GECS dividend to GE
|
|
–
|
|
|
1,130
|
|
Capital
contribution from GE to GECS
|
|
(9,500
|
)
|
|
–
|
|
Other
reclassifications and eliminations
|
|
(97
|
)
|
|
(148
|
)
|
Consolidated
cash from (used for) financing activities – continuing
operations
|
$
|
(16,787
|
)
|
$
|
14,313
|
|
|
|
|
|
|
|
|
(a)
|
Represents
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 and a financing source of cash to GECS.
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 operation. We will correct this
immaterial item in our 2009 Annual Report on Form 10-K.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
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 35% to $2.832
billion in the first quarter of 2009 compared with $4.351 billion in 2008.
Earnings per share (EPS) from continuing operations were $0.26 in the first
quarter of 2009, down 40% compared with $0.43 in the first quarter of
2008.
Loss
from discontinued operations, net of taxes, was an insignificant amount in both
the first quarter of 2009 and 2008, and included the results of GE Money Japan
(our Japanese personal loan business, Lake, and Japanese mortgage and card
businesses, excluding our minority ownership 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).
Net
earnings attributable to GE common shareowners decreased 36% to $2.736 billion
and EPS decreased 40% to $0.26 in the first quarter of 2009 compared with $4.304
billion and $0.43, respectively, in the first quarter of 2008.
Revenues
of $38.4 billion in the first quarter of 2009 were 9% lower than in the first
quarter of 2008, reflecting organic revenue declines and the stronger U.S.
dollar, partially offset by the net effects of acquisitions and dispositions.
Industrial sales decreased 1% to $24.0 billion, reflecting the stronger U.S.
dollar, partially offset by the net effects of acquisitions and dispositions.
Sales of product services (including sales of spare parts and related services)
grew 5% to $8.4 billion in the first quarter of 2009. Financial services
revenues decreased 20% over the comparable period of last year to $14.4 billion,
reflecting organic revenue declines and the stronger U.S. dollar.
Overall,
acquisitions contributed $1.2 billion and $2.3 billion to consolidated revenues
in the first quarters of 2009 and 2008, respectively. Our consolidated earnings
in the first quarters of 2009 and 2008 included approximately $0.4 billion and
$0.1 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 $0.1 billion in the first quarter of 2009 and higher revenues of
$0.3 billion in the first quarter of 2008. The effect of dispositions on
earnings was an increase of $0.4 billion and $0.3 billion in the first quarters
of 2009 and 2008, respectively.
The most
significant acquisitions affecting results in the first quarter of 2009 were
Airfoils Technologies International – Singapore Pte. Ltd. (ATI-Singapore) and
Vital Signs, Inc. at Technology Infrastructure; Hydril Pressure Control at
Energy Infrastructure; and CitiCapital, Bank BPH and Interbanca S.p.A. at
Capital Finance.
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
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 March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
8,239
|
|
$
|
7,724
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
1,273
|
|
$
|
1,070
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Energy(a)
|
$
|
6,941
|
|
$
|
6,356
|
|
Oil
& Gas
|
|
1,543
|
|
|
1,535
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
Energy(a)
|
$
|
1,150
|
|
$
|
937
|
|
Oil
& Gas
|
|
179
|
|
|
161
|
|
|
|
|
|
|
|
|
(a)
|
Effective
January 1, 2009, our Water business has been combined with Energy.
Prior-period amounts were reclassified to conform to the current period’s
presentation.
|
Energy
Infrastructure revenues rose 7%, or $0.5 billion, in the first quarter of 2009
on higher volume ($0.6 billion) and higher prices ($0.3 billion), partially
offset by the stronger U.S. dollar ($0.4 billion). The increase in volume
reflected increased sales of thermal equipment at Energy, and the effects of
acquisitions at Oil & Gas. The increase in price was primarily at Energy,
while the effects of the stronger U.S. dollar were at both Oil & Gas and
Energy.
Segment
profit rose 19%, or $0.2 billion, as higher prices ($0.3 billion) and higher
volume ($0.1 billion) more than offset higher material and other costs ($0.1
billion). The increase in volume primarily related to Energy. Higher material
and other costs were at both Energy and 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 March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
10,436
|
|
$
|
10,460
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
1,803
|
|
$
|
1,701
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Aviation
|
$
|
4,817
|
|
$
|
4,320
|
|
Enterprise
Solutions
|
|
913
|
|
|
1,105
|
|
Healthcare
|
|
3,545
|
|
|
3,887
|
|
Transportation
|
|
1,171
|
|
|
1,148
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
Aviation
|
$
|
1,080
|
|
$
|
775
|
|
Enterprise
Solutions
|
|
102
|
|
|
154
|
|
Healthcare
|
|
411
|
|
|
528
|
|
Transportation
|
|
217
|
|
|
254
|
|
Technology
Infrastructure revenues in the first quarter of 2009 were flat compared with the
first quarter of 2008, as the stronger U.S. dollar ($0.2 billion) and lower
volume ($0.1 billion) were offset by the net effects of acquisitions and
dispositions ($0.2 billion), including gains related to the ATI-Singapore
acquisition and the Times Microwave Systems disposition, and higher prices ($0.1
billion). The effects of the stronger U.S. dollar were primarily at Healthcare.
The decrease in volume at Healthcare and Enterprise Solutions was partially
offset by an increase in volume at Aviation. Higher prices were primarily at
Aviation.
Segment
profit rose 6% primarily from the net effects of acquisitions and dispositions
($0.2 billion), including gains related to the ATI-Singapore acquisition and the
Times Microwave Systems disposition, and higher prices ($0.1 billion), partially
offset by higher labor and other costs ($0.1 billion) and lower productivity
($0.1 billion). The increase in labor and other costs primarily related to
Aviation. The effects of productivity related to Transportation, Healthcare and
Enterprise Solutions, partially offset by Aviation.
NBC Universal revenues of $3.5
billion decreased 2% in the first quarter of 2009 as lower revenues in film
($0.1 billion) and lower earnings and impairments related to associated
companies and investment securities ($0.1 billion) were partially offset by
higher revenues in our television and cable businesses ($0.1 billion).
Television and cable businesses revenues rose as increased revenues from the
2009 Super Bowl broadcast more than offset lower advertising revenues. Segment
profit of $0.4 billion decreased 45% as lower earnings from our television
business, including the effects of costs related to the Super Bowl broadcast and
lower advertising revenues ($0.2 billion), lower earnings in film ($0.1 billion)
and lower earnings and impairments related to associated companies and
investment securities ($0.1 billion) were partially offset by higher earnings in
cable ($0.1 billion).
Capital
Finance
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
13,088
|
|
$
|
16,969
|
|
|
|
|
|
|
|
|
Segment
profit
|
$
|
1,119
|
|
$
|
2,679
|
|
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
March
31,
2008
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
542,250
|
|
$
|
620,038
|
|
$
|
572,903
|
|
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Commercial
Lending and Leasing (CLL)(a)
|
$
|
5,578
|
|
$
|
6,606
|
|
Consumer
(formerly GE Money)(a)
|
|
4,747
|
|
|
6,440
|
|
Real
Estate
|
|
975
|
|
|
1,883
|
|
Energy
Financial Services
|
|
644
|
|
|
770
|
|
GE
Commercial Aviation Services (GECAS)
|
|
1,144
|
|
|
1,270
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
CLL(a)
|
$
|
222
|
|
$
|
688
|
|
Consumer(a)
|
|
727
|
|
|
991
|
|
Real
Estate
|
|
(173
|
)
|
|
476
|
|
Energy
Financial Services
|
|
75
|
|
|
133
|
|
GECAS
|
|
268
|
|
|
391
|
|
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
March
31,
2008
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
$
|
222,878
|
|
$
|
243,928
|
|
$
|
228,176
|
|
Consumer(a)
|
|
164,617
|
|
|
221,184
|
|
|
187,927
|
|
Real
Estate
|
|
81,858
|
|
|
86,605
|
|
|
85,266
|
|
Energy
Financial Services
|
|
22,596
|
|
|
20,837
|
|
|
22,079
|
|
GECAS
|
|
50,301
|
|
|
47,484
|
|
|
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 23% and net earnings decreased 58% compared with the
first quarter of 2008. Revenues for the first quarters of 2009 and 2008 included
$0.7 billion and $0.2 billion of revenue from acquisitions, respectively, and in
2009 were reduced by $0.5 billion as a result of dispositions. Revenues for the
quarter also decreased $3.9 billion compared with the first quarter of 2008 as a
result of organic revenue declines and the stronger U.S. dollar. Net earnings decreased
by $1.6 billion in the first quarter of 2009 compared with the first quarter of
2008.
Additional
information about certain Capital Finance businesses follows.
CLL
revenues decreased 16% and net earnings decreased 68% compared with the first
quarter of 2008. Revenues for the first quarters of 2009 and 2008 included $0.5
billion and $0.1 billion from acquisitions, respectively. Revenues for the first
quarter of 2009 also included $0.3 billion related to the partial sale of our
limited partnership interest in Penske Truck leasing Co., L.P. (PTL) and
remeasurement of our retained investment. Revenues for the quarter decreased
$1.7 billion compared with the first quarter of 2008 as a result of organic
revenue declines ($1.4 billion) and the stronger U.S. dollar ($0.3 billion). Net
earnings decreased by $0.5 billion in the first quarter of 2009, resulting from
core declines related to the weakened economic environment ($0.8 billion), which
included an increase of $0.2 billion in the provision for losses on financing
receivables, and lower investment income of $0.1 billion, partially offset by
acquisitions ($0.1 billion). Net earnings included the effects of higher
mark-to-market losses and other-than-temporary impairments ($0.2 billion) and
the absence of the 2008 Genpact gain ($0.3 billion), partially offset by a gain
related to the partial sale of a limited partnership interest in PTL ($0.3
billion) and remeasurement of our retained investment.
Consumer
revenues decreased 26% and net earnings decreased 27% compared with the first
quarter of 2008. Revenues for the first quarter of 2009 included $0.1 billion
from acquisitions and were reduced by $0.5 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
quarter also decreased $1.0 billion compared with the first quarter of 2008 as a
result of the stronger U.S. dollar ($0.7 billion) and organic revenue declines
($0.3 billion). The decrease in net earnings resulted primarily from core
declines ($0.2 billion) and the lack of a current-year counterpart to the 2008
gain on sale of our CPS business ($0.2 billion). The decreases were partially
offset by higher securitization income ($0.1 billion). Core declines primarily
resulted from lower results in the U.S., reflecting the effects of higher
delinquencies ($0.6 billion), partially offset by growth in lower-taxed earnings
from global operations ($0.4 billion). The first quarter of
2009 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 48% and net earnings decreased 136% compared with the
first quarter of 2008. Revenues for the quarter decreased $0.9 billion compared
with the first quarter of 2008 as a result of organic revenue declines ($0.8
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 $0.6
billion compared with the first quarter of 2008, primarily from a decrease in
gains on sales of properties as compared to the prior period ($0.5 billion) and
a decline in real estate lending net earnings ($0.1 billion). Depreciation
expense on real estate properties totaled $0.2 billion in both the first quarter
of 2009 and 2008.
In the
normal course of our business operations, we sell certain real estate equity
investments when it is economically advantageous for us to do so. However, as
real estate values are affected by certain forces beyond our control (e.g.
market fundamentals and demographic conditions), it is difficult to predict with
certainty the level of future sales or sale prices.
Energy
Financial Services revenues decreased 16% and net earnings decreased 44%
compared with the first quarter of 2008. Revenues for the first quarter of 2009
included $0.1 billion of gains from dispositions. Revenues for the quarter also
decreased $0.2 billion compared with the first quarter of 2008 as a result of
organic declines ($0.2 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 and net earnings decreased 10% and 31%, respectively, compared with the
first quarter of 2008. The decrease in revenues resulted primarily from organic
revenue declines ($0.1 billion) due to lower asset sales. The decrease in net
earnings resulted primarily from core declines due to lower asset
sales.
Consumer & Industrial
revenues of $2.2 billion decreased 22%, or $0.6 billion, in the first quarter of
2009 compared with the first quarter of 2008, as lower volume ($0.7 billion) and
the stronger U.S. dollar ($0.1 billion) were partially offset by higher prices
($0.1 billion). The decrease in volume primarily reflected tightened consumer
spending in the U.S. domestic market. Segment profit decreased 75%, or $0.1
billion, in the first quarter of 2009 as lower productivity ($0.1 billion) and
lower volume ($0.1 billion) were partially offset by higher prices ($0.1
billion).
Discontinued
Operations
|
Three
months ended March 31
|
|
(In
millions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations,
|
|
|
|
|
|
|
net
of taxes
|
$
|
(21
|
)
|
$
|
(47
|
)
|
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.
For
additional information related to discontinued operations, see Note 3 to the
condensed, consolidated financial statements.
Corporate items and
eliminations revenues in the first quarter of 2009 increased by $0.3
billion as a result of net gains on hedging activity ($0.6 billion), partially
offset by lower revenues from insurance activities ($0.1 billion) and lower
income from guaranteed investment contracts ($0.1 billion). Corporate items and
eliminations costs were flat compared to first quarter 2008 as an increase in
restructuring, rationalization and other charges ($0.2 billion) was offset by
lower incentive compensation costs ($0.1 billion) and net gains on hedging
activity ($0.1 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 first quarter of 2009, these
included $0.1 billion at each of Technology Infrastructure, Energy
Infrastructure and Capital Finance, primarily for restructuring, rationalization
and other charges, and $0.1 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 quarter of 2009 resulted from the
following:
·
|
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
GECC;
|
·
|
The
U.S. dollar was stronger at March 31, 2009 than at December 31, 2008,
decreasing 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; and
|
·
|
Collections
on financing receivables exceeded originations at
GECS.
|
Consolidated
assets were $760.8 billion at March 31, 2009, a decrease of $37.0 billion from
December 31, 2008. GE assets decreased $5.7 billion, and financial services
assets decreased $25.4 billion.
GE
assets were $193.3 billion at March 31, 2009, a $5.7 billion decrease from
December 31, 2008. The decrease reflects a $10.0 billion decrease in cash and
equivalents (primarily related to a $9.5 billion capital contribution to GECS
during the quarter), a $2.5 billion decrease in current receivables and a $0.4
billion decrease in property, plant and equipment – net, partially offset by a
$7.5 billion increase in investment in GECS.
Financial
Services assets were $635.5 billion at March 31, 2009. The $25.4 billion
decrease from December 31, 2008, was primarily attributable to decreases in
net financing receivables of $17.4 billion, assets held for sale of $10.6
billion, net property, plant and equipment (including equipment leased to
others) of $5.9 billion, goodwill of $0.9 billion and other GECS receivables of
$0.9 billion, partially offset by increases in cash and equivalents of $7.8
billion and all other assets of $2.5 billion.
Consolidated
liabilities of $651.3 billion at March 31, 2009, were $32.8 billion lower than
the year-end 2008 balance. GE liabilities decreased $1.8 billion, while
financial services liabilities decreased $32.5 billion.
GE
liabilities were $85.8 billion at March 31, 2009. During 2009, short-term
borrowings decreased $0.8 billion to $1.6 billion and long-term borrowings
increased $1.3 billion to $11.2 billion. The ratio of borrowings to total
capital invested for GE at the end of the first quarter was 10.6% compared with
9.9% at the end of last year and 10.2% at March 31, 2008.
Financial
Services liabilities decreased $32.5 billion from year-end 2008 to
$572.8.billion reflecting decreases in total borrowings of $21.5 billion, all
other liabilities of $8.2 billion, accounts payable of $2.2 billion and
liabilities of businesses held for sale of $0.6 billion.
Cash
Flows
Consolidated
cash and equivalents were $46.8 billion at March 31, 2009, a decrease of $1.4
billion during the first quarter of 2009. Cash and equivalents totaled $15.3
billion at March 31, 2008, a decrease of $0.5 billion from December 31,
2007.
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 aggregated $2.1 billion at March 31, 2009, compared with $5.1
billion at March 31, 2008. GE CFOA totaled $2.8 billion for the first quarter of
2009 compared with $4.9 billion for the first quarter 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.
|
Three
months ended March 31
|
|
(In
billions)
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
Operating
cash collections(a)
|
$
|
25.2
|
|
$
|
26.4
|
|
Operating
cash payments
|
|
(22.4
|
)
|
|
(22.6
|
)
|
Cash
dividends from GECS to GE
|
|
–
|
|
|
1.1
|
|
GE
cash from operating activities (GE CFOA)(a)
|
$
|
2.8
|
|
$
|
4.9
|
|
|
|
|
|
|
|
|
(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 an insignificant
amount and $0.6 billion in the three months ended March 31, 2009 and 2008,
respectively. See Note 19 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 $1.2 billion during the first three
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 the wide range of material and services necessary in
a diversified global organization. GE operating cash payments decreased in the
first three months of 2009 by $0.2 billion, comparable to the decrease in GE
total costs and expenses.
GE CFOA
decreased $2.0 billion compared with the first quarter of 2008, reflecting the
lack of a current-year dividend from GECS ($1.1 billion), a decrease in progress
collections ($2.3 billion) and other activities ($1.0 billion), partially offset
by other working capital improvements ($2.4 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 we show 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 suspended its normal dividend to GE.
GECS
Cash Flow
GECS
cash and equivalents aggregated $45.2 billion at March 31, 2009, compared with
$10.8 billion at March 31, 2008. GECS cash used for operating activities totaled
$3.5 billion for the first three months of 2009, compared with cash from
operating activities of $3.3 billion for the first three months of 2008. This
decrease was primarily due to an overall decline in net earnings, decreases in
cash collateral received from counterparties on derivative contracts and
declines in volume resulting in a reduction of accounts payables.
Consistent
with our plan to reduce GECS asset levels, cash from investing activities was
$17.2 billion during the first three months of 2009. $18.0 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 the acquisition of Interbanca
S.p.A.
GECS
cash used for financing activities in the first quarter of 2009, related
primarily to a $14.3 billion reduction in commercial paper outstanding,
repayments on borrowings exceeding new issuances ($0.6 billion), offset by 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 19 to the
condensed, consolidated financial statements for further information related to
intercompany eliminations.
Fair
Value Measurements
Effective
January 1, 2008, we adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, for
all financial instruments and non-financial instruments accounted for at fair
value on a recurring basis. Effective January 1, 2009, we adopted SFAS 157 for
all non-financial instruments accounted for at fair value on a non-recurring
basis. Adoption of SFAS 157 did not have a material effect on our financial
position or results of operations. During the first quarter 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 SFAS 157 is provided in Note 15 to the condensed, consolidated
financial statements.
At March
31, 2009, the aggregate amount of investments that are measured at fair value
through earnings totaled $7.1 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). Investment securities totaled $41.8 billion at
March 31, 2009, compared with $41.2 billion at December 31, 2008. Of the amount
at March 31, 2009, we held debt securities with an estimated fair value of $34.1
billion, which included residential mortgage-backed securities (RMBS) and
commercial mortgage-backed securities (CMBS) with estimated fair values of $3.8
billion and $2.2 billion, respectively. Unrealized losses on debt securities
were $6.4 billion and $5.4 billion at March 31, 2009, and December 31, 2008,
respectively. This amount included unrealized losses on RMBS and CMBS of $1.1
billion and $0.9 billion at March 31, 2009, as compared with $1.1 billion and
$0.8 billion at December 31, 2008, respectively. Unrealized losses
increased as a result of continuing market deterioration, and we believe
primarily represent adjustments for liquidity on investment-grade
securities.
Of the
$3.8 billion of RMBS, our exposure to subprime credit was approximately $1.2
billion, and those 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 quarters 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 using both quantitative
and qualitative criteria. Quantitative criteria include the length of time and
magnitude of the amount that each security is in an unrealized loss position
and, for securities with fixed maturities, whether the issuer is in compliance
with terms and covenants of the security. Qualitative criteria include the
financial health of and specific prospects for the issuer, as well as our intent
and ability to hold the security to maturity or until forecasted recovery. In
addition, our evaluation at March 31, 2009 considered the continuing market
deterioration that resulted in the lack of liquidity and the historic levels of
price volatility and credit spreads. With respect to corporate bonds, we placed
greater emphasis on the credit quality of the issuers. 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 the
availability of credit enhancements, principally monoline insurance. 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. FASB Staff Position
(FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, modifies the requirements for
recognizing and measuring other-than-temporary impairment for securities. As
discussed in the New Accounting Standards section of this Item, we will adopt
this FSP in the second quarter of 2009.
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 March 31, 2009, our investment securities insured by
Monolines totaled $3.0 billion, including $1.0 billion of our $1.2 billion
investment in subprime RMBS. Although several of the Monolines have been
downgraded by the rating agencies, a majority of the $3.0 billion is insured by
Monolines rated as investment-grade by at least one of the major rating
agencies. 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 as determined in accordance with EITF
Issue 99-20, Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests That Continue to Be Held by a Transferor in Securitized Financial
Assets. 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 March 31, 2009, the unrealized loss associated with securities
subject to Monoline credit enhancement was $0.6 billion, of which $0.3 billion
relates to expected credit losses and the remaining $0.3 billion relates to
other market factors.
Other-than-temporary
impairment losses totaled $0.2 billion in both the first quarter of 2009 and
2008. In the first quarter of 2009, we recognized other-than-temporary
impairments, primarily relating to equity securities, RMBS, retained interests
in our securitization arrangements and corporate debt securities across a broad
range of industries. Investments in retained interests in securitization
arrangements also increased by $0.1 billion during the first quarter of 2009,
reflecting increases in fair value accounted for in accordance with SFAS 155,
Accounting for Certain Hybrid
Financial Instruments, that became effective at the beginning of
2007.
Our
qualitative review attempts to identify issuers’ securities that are “at-risk”
of impairment, that is, with a possibility of other-than-temporary impairment
recognition in the following 12 months. Of securities with unrealized losses at
March 31, 2009, $0.9 billion of unrealized loss was at risk of being charged to
earnings assuming no further changes in price, and before considering the effect
of the future adoption of FSP FAS 115-2 and FAS 124-2. This amount primarily
related to investments in RMBS and CMBS securities, equity securities, and
corporate debt securities across a broad range of industries. In addition, we
had approximately $2.9 billion of exposure to commercial, regional and foreign
banks, primarily relating to corporate debt securities, with associated
unrealized losses of $0.7 billion. Continued uncertainty in the capital markets
may cause increased levels of other-than-temporary impairments.
At March
31, 2009, unrealized losses on investment securities totaled $6.6 billion,
including $5.0 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 March 31, 2009, more than
75% 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, $2.3
billion and $2.5 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 March 31, 2009, the vast majority relate to
securities held to support obligations to annuitants and policyholders in our
run-off insurance operations and holders of GICs. We intend to hold them at
least until such time as their individual fair values exceed their amortized
cost and we have the ability to hold all such debt securities until their
maturities. 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 8 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 SOP 03-3, Accounting for Certain Loans or Debt
Securities Acquired in a Transfer, 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 under SFAS 114, Accounting by Creditors for
Impairment of a Loan.
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 43% 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 57% 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. In
addition, approximately 2% of this portfolio is unsecured corporate
debt.
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, 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. We adopted
SFAS 141(R) on January 1, 2009. As a result of this adoption, 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
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
March
31,
2009
|
|
December
31,
2008
|
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
100,985
|
|
$
|
105,410
|
|
$
|
2,706
|
|
$
|
1,974
|
|
$
|
920
|
|
$
|
843
|
|
Europe
|
|
41,208
|
|
|
37,767
|
|
|
437
|
|
|
345
|
|
|
327
|
|
|
288
|
|
Asia
|
|
14,528
|
|
|
16,683
|
|
|
389
|
|
|
306
|
|
|
178
|
|
|
163
|
|
Other
|
|
764
|
|
|
786
|
|
|
11
|
|
|
2
|
|
|
4
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
56,974
|
|
|
60,753
|
|
|
3,874
|
|
|
3,321
|
|
|
526
|
|
|
383
|
|
Non-U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
22,256
|
|
|
24,441
|
|
|
445
|
|
|
413
|
|
|
1,038
|
|
|
1,051
|
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
25,286
|
|
|
27,645
|
|
|
833
|
|
|
758
|
|
|
1,718
|
|
|
1,700
|
|
Non-U.S.
auto
|
|
15,343
|
|
|
18,168
|
|
|
95
|
|
|
83
|
|
|
249
|
|
|
222
|
|
Other
|
|
10,309
|
|
|
11,541
|
|
|
212
|
|
|
175
|
|
|
199
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate(b)
|
|
45,373
|
|
|
46,735
|
|
|
554
|
|
|
194
|
|
|
396
|
|
|
301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial Services
|
|
8,360
|
|
|
8,392
|
|
|
241
|
|
|
241
|
|
|
66
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
15,501
|
|
|
15,429
|
|
|
191
|
|
|
146
|
|
|
61
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
3,863
|
|
|
4,031
|
|
|
61
|
|
|
38
|
|
|
32
|
|
|
28
|
|
Total
|
$
|
360,750
|
|
$
|
377,781
|
|
$
|
10,049
|
|
$
|
7,996
|
|
$
|
5,714
|
|
$
|
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)
|
Financing
receivables included $645 million and $731 million of construction loans
at March 31, 2009 and December 31, 2008,
respectively.
|
|
Nonearning
receivables as a
percent
of financing receivables
|
|
Allowance
for losses as a percent
of
nonearning receivables
|
|
Allowance
for losses as a percent
of
total financing receivables
|
|
|
March
31,
2009
|
|
December
31,
2008
|
|
March
31,
2009
|
|
December
31,
2008
|
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLL(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
2.7
|
%
|
|
1.9
|
%
|
|
34.0
|
%
|
|
42.7
|
%
|
|
0.9
|
%
|
|
0.8
|
%
|
Europe
|
|
1.1
|
|
|
0.9
|
|
|
74.8
|
|
|
83.5
|
|
|
0.8
|
|
|
0.8
|
|
Asia
|
|
2.7
|
|
|
1.8
|
|
|
45.8
|
|
|
53.3
|
|
|
1.2
|
|
|
1.0
|
|
Other
|
|
1.4
|
|
|
0.3
|
|
|
36.4
|
|
|
100.0
|
|
|
0.5
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mortgages
|
|
6.8
|
|
|
5.5
|
|
|
13.6
|
|
|
11.5
|
|
|
0.9
|
|
|
0.6
|
|
Non-U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
2.0
|
|
|
1.7
|
|
|
233.3
|
|
|
254.5
|
|
|
4.7
|
|
|
4.3
|
|
U.S.
installment and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
revolving
credit
|
|
3.3
|
|
|
2.7
|
|
|
206.2
|
|
|
224.3
|
|
|
6.8
|
|
|
6.1
|
|
Non-U.S.
auto
|
|
0.6
|
|
|
0.5
|
|
|
262.1
|
|
|
267.5
|
|
|
1.6
|
|
|
1.2
|
|
Other
|
|
2.1
|
|
|
1.5
|
|
|
93.9
|
|
|
129.1
|
|
|
1.9
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
|
1.2
|
|
|
0.4
|
|
|
71.5
|
|
|
155.2
|
|
|
0.9
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
Financial Services
|
|
2.9
|
|
|
2.9
|
|
|
27.4
|
|
|
24.1
|
|
|
0.8
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GECAS
|
|
1.2
|
|
|
0.9
|
|
|
31.9
|
|
|
41.1
|
|
|
0.4
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
1.6
|
|
|
0.9
|
|
|
52.5
|
|
|
73.7
|
|
|
0.8
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2.8
|
|
|
2.1
|
|
|
56.9
|
|
|
66.6
|
|
|
1.6
|
|
|
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.
|
The
majority of the allowance for losses of $5.7 billion at March 31, 2009, and $5.3
billion at December 31, 2008, is determined based upon a formulaic approach. A
portion of the allowance for losses is related to specific reserves on loans
that have been determined to be individually impaired under SFAS 114. Under SFAS
114, individually impaired loans 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. These
specific reserves amount to $0.9 billion and $0.6 billion at March 31, 2009 and
December 31, 2008, respectively. Further information pertaining to specific
reserves is included in the table below.
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.
|
At
|
|
(In
millions)
|
March
31,
2009
|
|
December
31,
2008
|
|
|
|
|
|
|
|
|
Loans
requiring allowance for losses
|
$
|
4,138
|
|
$
|
2,712
|
|
Loans
expected to be fully recoverable
|
|
1,682
|
|
|
871
|
|
Total
impaired loans
|
$
|
5,820
|
|
$
|
3,583
|
|
|
|
|
|
|
|
|
Allowance
for losses
|
$
|
908
|
|
$
|
635
|
|
Average
investment during the period
|
|
4,665
|
|
|
2,064
|
|
Interest
income earned while impaired(a)
|
|
17
|
|
|
27
|
|
|
|
|
|
|
|
|
(a)
|
Recognized
principally on cash basis.
|
The
portfolio of financing receivables, before allowance for losses, was $360.8
billion at March 31, 2009, and $377.8 billion at December 31, 2008. Financing
receivables, before allowance for losses, decreased $17.0 billion from December
31, 2008, primarily as a result of core declines ($10.8 billion), the stronger
U.S. dollar ($9.7 billion) and commercial and equipment securitization and sales
($4.8 billion), partially offset by acquisitions ($8.4 billion).
Related
nonearning receivables totaled $10.0 billion (2.8% of outstanding receivables)
at March 31, 2009, compared with $8.0 billion (2.1% of outstanding receivables)
at December 31, 2008. Related 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 March 31, 2009, totaled $5.7 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 $0.4 billion from December 31, 2008,
primarily due to increasing delinquencies and nonearning receivables, reflecting
the continued weakened economic and credit environment.
CLL − Americas. Nonearning
receivables of $2.7 billion represented 26.9% of total nonearning receivables at
March 31, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 42.7% at December 31, 2008, to 34.0% at March 31,
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 percentage of financing
receivables increased from 1.9% at December 31, 2008, to 2.7% at March 31, 2009,
primarily from an increase in nonearning receivables in our inventory finance,
franchise finance, and retail/publishing lending portfolios; and secured lending
in media and communications, auto and transportation, and consumer manufacturing
companies. Our corporate aircraft platform is also experiencing increased
delinquencies and nonearning receivables and more remarketing pressure, as a
result of lower demand, causing declining asset values.
CLL – Europe. Nonearning
receivables of $0.4 billion represented 4.3% of total nonearning receivables at
March 31, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 83.5% at December 31, 2008, to 74.8% at March 31,
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 percentage of financing
receivables increased from 0.9% at December 31, 2008, to 1.1% at March 31, 2009,
primarily from 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.
CLL – Asia. Nonearning
receivables of $0.4 billion represented 3.9% of total nonearning receivables at
March 31, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 53.3% at December 31, 2008, to 45.8% at March 31,
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 percentage of financing receivables increased from 1.8% at
December 31, 2008, to 2.7% at March 31, 2009, primarily from an increase in
nonearning receivables at our secured financing businesses such
as corporate air, distribution finance and our corporate asset-based
lending platforms in Australia, New Zealand and Japan, and a lower
financing receivables balance.
Consumer − non-U.S. residential
mortgages. Nonearning receivables of $3.9 billion represented 38.6% of
total nonearning receivables at March 31, 2009. The ratio of allowance for
losses as a percent of nonearning receivables increased from 11.5% at December
31, 2008, to 13.6% at March 31, 2009. In the first quarter of 2009, our
nonearning receivables increased primarily as a result of continued decline in
the U.K. housing market and our allowance increased accordingly. Our non-U.S.
mortgage portfolio has a loan-to-value of approximately 75% at origination and
the vast majority are first lien positions. In addition, we carry mortgage
insurance on most of our first mortgage loans originated at a loan-to-value
above 80%. At March 31, 2009, we had foreclosed on approximately 1,100 houses in
the U.K. which had a value of $0.1 billion.
Consumer − non-U.S. installment and
revolving credit. Nonearning receivables of $0.4 billion represented 4.4%
of total nonearning receivables at March 31, 2009. The ratio of allowance for
losses as a percent of nonearning receivables declined from 254.5% at December
31, 2008, to 233.3% at March 31, 2009, reflecting the effects of loan repayments
and reduced originations.
Consumer − U.S. installment and
revolving credit. Nonearning receivables of $0.8 billion represented 8.3%
of total nonearning receivables at March 31, 2009. The ratio of allowance for
losses as a percent of nonearning receivables declined from 224.3% at December
31, 2008, to 206.2% at March 31, 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 loan repayments and
reduced originations.
Real Estate. Nonearning
receivables of $0.6 billion represented 5.5% of total nonearning receivables at
March 31, 2009. The ratio of allowance for losses as a percent of nonearning
receivables declined from 155.2% at December 31, 2008, to 71.5% at March 31,
2009, primarily due to an increase in nonearning assets which required lower
levels of specific reserves based on the strength of the underlying collateral
values. The ratio of nonearning receivables as a percentage of financing
receivables increased from 0.4% at December 31, 2008, to 1.2% at March 31, 2009,
driven by a $1.4 billion decrease in the overall balance of financing
receivables and an increase in nonearning receivables primarily attributable to
continued economic deterioration in the U.S. and U.K. markets. Allowance for
losses as a percentage of financing receivables increased from 0.6% at December
31, 2008, to 0.9% at March 31, 2009, driven by an increase in specific
provisions.
Delinquency
rates on managed equipment financing loans and leases and managed consumer
financing receivables follow.
|
Delinquency
rates at
|
|
|
March
31,
2009(a)
|
|
December
31,
2008
|
|
March
31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
Financing
|
|
2.84
|
%
|
|
2.17
|
%
|
|
1.36
|
%
|
|
Consumer
|
|
8.20
|
|
|
7.43
|
|
|
5.66
|
|
|
U.S.
|
|
7.12
|
|
|
7.14
|
|
|
5.75
|
|
|
Non-U.S.
|
|
8.72
|
|
|
7.57
|
|
|
5.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquency
rates on equipment financing loans and leases increased from December 31, 2008
and March 31, 2008, to March 31, 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 nine basis points from March 31,
2008 to March 31, 2009, as a result of the inclusion of the CitiCapital and
Sanyo acquisitions. The current financial market turmoil and tight credit
conditions 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
March 31, 2008, to March 31, 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 March 31, 2009, roughly 44% 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 March
31, 2009. See Notes 10 and 11 to the condensed, consolidated financial
statements.
All other assets comprise
mainly real estate investments, equity and cost method investments, derivative
instruments and assets held for sale. All other assets totaled $88.2 billion at
March 31, 2009, including a $6.1 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 quarter of 2009, we recognized
other-than-temporary impairments of cost and equity method investments of $0.2
billion. Of the amount at March 31, 2009, we had cost method investments
totaling $2.4 billion. The fair value of and unrealized loss on cost method
investments in a continuous unrealized loss position for less than 12 months at
March 31, 2009, were $0.7 billion and $0.2 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 March 31, 2009, were $0.1 billion
and an insignificant amount, respectively.
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, payroll and general
accruals. 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; incremental deposit funding and
alternative sources of funding, in addition to deposits already on hand;
long-term debt issuances; collections of financing receivables exceeding
originations; and cash on hand.
Interest
on borrowings is funded using interest earned on existing financing receivables.
During the first quarter of 2009, we earned interest income on financing
receivables of $6 billion, which more than offset interest expense of $5
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.
The
global credit markets have recently experienced unprecedented 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 have
taken a number of initiatives to strengthen our liquidity.
Specifically:
·
|
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 in the
third quarter of 2009, which will save the company approximately $4
billion during the remainder of 2009 and approximately $9 billion annually
thereafter;
|
·
|
In
September 2008, we reduced the GECS dividend to GE from 40% to 10% of GECS
earnings and suspended our stock repurchase program. Effective
January 2009, we fully suspended the GECS dividend to
GE;
|
·
|
We
have completed our funding related to our long-term funding target of $45
billion for 2009;
|
·
|
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;
|
·
|
We
reduced our commercial paper borrowings at GECS to $58 billion at March
31, 2009;
|
·
|
We
targeted to further reduce GECS commercial paper borrowings to $50 billion
by the end of 2009 and to maintain committed credit lines equal to GECS
commercial paper borrowings going
forward;
|
·
|
We
registered to use the Federal Reserve’s Commercial Paper Funding Facility
(CPFF) for up to $98 billion, which is available through October 31,
2009;
|
·
|
We
registered to use the Federal Deposit Insurance Corporation’s (FDIC)
Temporary Liquidity Guarantee Program (TLGP) for approximately $126
billion;
|
·
|
At
GECS, we are managing collections versus originations to help support
liquidity needs and are estimating $25 billion of excess collections in
2009; and
|
·
|
We
have evaluated and are prepared, depending on market conditions and terms,
to securitize assets for which investors can use the Federal Reserve’s
Term Asset-Backed Securities Lending Facility
(TALF).
|
Cash
and Equivalents
Our cash
and equivalents were $46.8 billion at March 31, 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 $58.3 billion that had been extended to
us by 60 financial institutions at March 31, 2009. These lines include $37.4
billion of revolving credit agreements under which we can borrow funds for
periods exceeding one year. Additionally, $19.6 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. In the first quarter of 2009, we completed issuances of
$23.6 billion of long-term debt under the TLGP. GE Capital has elected to
participate in this program, under which the FDIC guarantees certain senior,
unsecured debt issued before October 31, 2009 (with a maturity of greater than
30 days that matures on or prior to December 31, 2012). GE Capital pays
annualized fees associated with this program that range from 60 to 160 basis
points of the principal amount of each issuance and vary according to the
issuance date and maturity. We also issued $5.2 billion in non-guaranteed
senior, unsecured debt with maturities of up to 30 years. These issuances, along
with the $13.4 billion of pre-funding done in December 2008, brought our
aggregate issuances to $42 billion as of March 31, 2009. We subsequently
completed our anticipated 2009 long-term funding plan. In 2009, we also intend
to start pre-funding our 2010 long-term funding target of $35 to $40 billion
using the TLGP and non-guaranteed debt issuances.
During
the fourth quarter of 2008, GECS issued commercial paper into the CPFF. The last
tranche of this commercial paper matured in February 2009. Although we do not
anticipate further utilization of the CPFF, it remains available until October
31, 2009.
We
incurred $1.3 billion of fees for our participation in the TLGP and CPFF
programs through March 31, 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 using bank commercial paper conduits. Securitization
proceeds were $16.1 billion during the first quarter of 2009, compared to $20.8
billion in the first quarter of 2008. We have evaluated and are prepared,
depending on market conditions and terms, to securitize assets such as credit
card receivables, floorplan receivables and equipment loans, for which investors
can use the TALF.
We have
deposit-taking capability at nine 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 $34 billion at March 31, 2009, including CDs of $21
billion. Total alternative funding decreased from $54 billion to $43 billion
during the first quarter as we reduced our reliance on short-term bank
borrowings. We expect deposits to grow and constitute a greater percentage of
our total funding as we grow assets at these banks.
During
the first quarter of 2009, GE Capital extended $68.5 billion of credit to
customers. Of this amount, $16.3 billion was extended to U.S. customers,
including 3 million new accounts, and $4.1 billion of credit (including unfunded
commitments of $1.4 billion) to U.S. companies, with an average transaction size
of $0.3 million.
After
the expiration of the TLGP, GE Capital’s commercial paper (with maturities
greater than 30 days) and long-term debt issuances will no longer be guaranteed
by the FDIC. The effect on our liquidity when the TLGP expires will depend on a
number of factors, including our funding needs and market conditions at that
time. If the current disruption in the credit markets continues after the
expiration of the TLGP, 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 sources of liquidity available, 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 time deposits and asset-backed
fundings;
|
·
|
Maintaining
availability of our bank credit lines equal to commercial paper
outstanding;
|
·
|
Generating
additional cash from industrial operations;
and
|
·
|
Contributing
additional capital from the Company 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 sources of
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
Corporation.
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.
Income
Maintenance Agreement
If GE
Capital’s ratio of earnings to fixed charges deteriorates below 1.10:1 for any
fiscal year, GE has agreed to contribute capital to GE Capital sufficient to
bring the ratio to at least 1.10:1 for that year in accordance with the
agreement.
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 0.97:1 in the first quarter 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.
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
and we do not anticipate additional 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 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 March 31, 2009, our
remaining equity investment in PTL was 49.9% and is accounted for under the
equity method.
E.
New Accounting Standards
In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. The FSP modifies the existing model for
recognition and measurement of impairment for debt securities. We will adopt the
FSP in the second quarter of 2009. The two principal changes to the impairment
model for securities are as follows:
·
|
Recognition
of an other-than-temporary impairment charge is required if any of these
conditions are met: (1) we do not expect to recover the entire 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 cost basis.
|
·
|
If
the first condition above is met, but we do not intend to sell and are not
likely to be required to sell the security, we would be required to record
the difference between the security’s 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 cost basis and its fair value in
earnings.
|
We
expect that the effect of the new standard on earnings and financial position
will be modest; however, the effect will be dependent upon conditions and
circumstances at the time of adoption.
In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. We do not
expect that the FSP will have a significant effect on our fair value
measurements upon adoption.
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 March 31, 2009, and (ii) no change in internal
control over financial reporting occurred during the quarter ended March 31,
2009, that has materially affected, or is reasonably likely to materially
affect, such internal control over financial reporting.
Part
II. Other Information
Item
1. Legal Proceedings.
In March
and April 2009, individual 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 seek unspecified damages. The complaints principally allege that GE
falsely stated that it would maintain its quarterly $0.31 per share dividend,
while allegedly concealing that the company did not have sufficient cash on hand
and cash flow to achieve that goal. One of the complaints also alleges that GE
made misrepresentations concerning projected earnings and losses for GE Capital
in 2009. We expect to move to consolidate these cases and intend to defend
ourselves vigorously against these allegations.
The risk
factor set forth below updates the corresponding risk factor in Part I, “Item
1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December
31, 2008. In addition to the risk factor below, you should carefully consider
the other risk factors discussed in our Annual Report on Form 10-K for the year
ended December 31, 2008, which could materially affect our business, financial
position and results of operations.
The
unprecedented conditions in the financial and credit markets may affect the
availability and cost of GE Capital’s funding.
The
financial and credit markets have been experiencing unprecedented levels of
volatility and disruption, putting downward pressure on financial and other
asset prices generally and on the credit availability for certain issuers. The
U.S. Government and the Federal Reserve Bank have created a number of programs
to help stabilize credit markets and financial institutions and restore
liquidity. Many non-U.S. governments have also created or announced similar
measures for institutions in their respective countries. These programs have
improved conditions in the credit and financial markets, but there can be no
assurance that these programs, individually or collectively, will continue to
have beneficial effects on the markets overall, or will resolve the credit or
liquidity issues of companies that participate in the programs.
A large
portion of GE Capital’s borrowings have been issued in the commercial paper and
term debt markets. GE Capital has continued to issue commercial paper and, as
planned, has reduced its outstanding commercial paper balance to $58 billion at
March 31, 2009. Since November 2008, GE Capital has also issued term debt,
mainly debt guaranteed by the Federal Deposit Insurance Corporation under the
Temporary Liquidity Guarantee Program (TLGP), which is scheduled to expire in
October 2009, and, to a lesser extent, on a non-guaranteed basis. Although the
commercial paper and term debt markets have remained available to GE Capital to
fund its operations and debt maturities, there can be no assurance that such
markets will continue to be available or, if available, that the cost of such
funding will not substantially increase. Factors that may cause an increase in
our funding costs include: a decreased reliance on short-term funding, such as
commercial paper, in favor of longer-term funding arrangements; market
conditions and debt spreads for our debt after expiration of the TLGP;
refinancing of funding that we have obtained under the TLGP at market rates at
the time such funding matures; decreased capacity and increased competition
among debt issuers; and our credit ratings in effect at the time of refinancing.
If GE Capital’s cost of funding were to increase, it may adversely affect its
competitive position and result in lower lending margins, earnings and cash
flows as well as lower returns on its shareowner’s equity and invested capital.
If current levels of market disruption and volatility continue or worsen, or if
we cannot further reduce GE Capital’s asset levels as planned in 2009, we would
seek to repay commercial paper and term debt as it becomes due or to meet our
other liquidity needs by using the Federal Reserve’s Commercial Paper Funding
Facility (CPFF) and the TLGP, drawing upon contractually committed lending
agreements primarily provided by global banks and/or seeking other sources of
funding. There can be no assurance that the CPFF, which is scheduled to expire
in October 2009, and the TLGP will be extended beyond their scheduled
expiration, or that, under extreme market conditions, contractually committed
lending agreements and other funding sources would be available or sufficient.
While we currently do not anticipate any equity offerings, other sources of
funding that involve the issuance of additional equity securities would be
dilutive to our existing shareowners.
Our 2009
funding plan anticipates approximately $45 billion of senior, unsecured
long-term debt issuance. As of March 31, 2009, we had funded $42 billion and
subsequently completed our 2009 long-term funding target. We have also announced
that during 2009 we intend to use the TLGP to start pre-funding our 2010
long-term funding target of $35 to $40 billion. As of March 31, 2009, we had $74
billion of debt outstanding under the TLGP and have a maximum capacity under the
program of approximately $126 billion.
Item
2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Period(a)
|
|
Total
number of
shares
purchased
|
(a)(b)
|
Average
price
paid
per share
|
|
Total
number of shares
purchased
as part of our
share
repurchase program
|
(a)(c)
|
Approximate
dollar
value
of shares that
may
yet be purchased
under
our share
repurchase
program
|
|
(Shares
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
461
|
|
|
$
|
14.28
|
|
|
|
399
|
|
|
|
|
|
February
|
|
|
737
|
|
|
$
|
10.70
|
|
|
|
565
|
|
|
|
|
|
March
|
|
|
640
|
|
|
$
|
7.96
|
|
|
|
558
|
|
|
|
|
|
Total
|
|
|
1,838
|
|
|
$
|
10.65
|
|
|
|
1,522
|
|
|
|
$11.8
billion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Information
is presented on a fiscal calendar basis, consistent with our quarterly
financial reporting.
|
(b)
|
This
category includes 316 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.
|
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 March 31, 2009 (File No.
001-06461)).
|
|
*
|
Data
required by Statement of Financial Accounting Standards 128, Earnings per Share, is
provided in Note 7 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)
|
|
May
1, 2009
|
|
/s/
Jamie S. Miller
|
|
Date
|
|
Jamie
S. Miller
Vice
President and Controller
Duly
Authorized Officer and Principal Accounting Officer
|
|