UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
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) |
(Registrants 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 x 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 x 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 | x | 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 x
There were 10,691,220,000 shares of common stock with a par value of $0.06 per share outstanding at June 25, 2010.
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: 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 conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporations (GECC) funding and on our ability to reduce GECCs asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the adequacy of our cash flow and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
(2)
General Electric Company and consolidated affiliates
Condensed Statement of Earnings
Three months ended June 30 (Unaudited) | ||||||||||||||||||||||||||
Consolidated | GE(a) | Financial Services (GECS) | ||||||||||||||||||||||||
(In millions, except share amounts) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||
Sales of goods |
$ | 14,905 | $ | 15,906 | $ | 14,736 | $ | 15,701 | $ | 168 | $ | 205 | ||||||||||||||
Sales of services |
9,599 | 10,172 | 9,667 | 10,311 | | | ||||||||||||||||||||
Other income |
278 | 34 | 304 | 80 | | | ||||||||||||||||||||
GECS earnings from continuing operations |
| | 822 | 367 | | | ||||||||||||||||||||
GECS revenues from services |
12,662 | 12,996 | | | 12,980 | 13,252 | ||||||||||||||||||||
Total revenues |
37,444 | 39,108 | 25,529 | 26,459 | 13,148 | 13,457 | ||||||||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||
Cost of goods sold |
11,129 | 12,450 | 10,975 | 12,287 | 154 | 164 | ||||||||||||||||||||
Cost of services sold |
6,067 | 6,354 | 6,134 | 6,493 | | | ||||||||||||||||||||
Interest and other financial charges |
4,171 | 4,653 | 430 | 348 | 3,870 | 4,468 | ||||||||||||||||||||
Investment contracts, insurance losses and insurance annuity benefits |
722 | 779 | | | 770 | 823 | ||||||||||||||||||||
Provision for losses on financing receivables |
2,009 | 2,817 | | | 2,009 | 2,817 | ||||||||||||||||||||
Other costs and expenses |
9,059 | 8,933 | 3,589 | 3,556 | 5,637 | 5,471 | ||||||||||||||||||||
Total costs and expenses |
33,157 | 35,986 | 21,128 | 22,684 | 12,440 | 13,743 | ||||||||||||||||||||
Earnings (loss) from continuing operations before income taxes |
4,287 | 3,122 | 4,401 | 3,775 | 708 | (286 | ) | |||||||||||||||||||
Benefit (provision) for income taxes |
(885 | ) | (227 | ) | (986 | ) | (897 | ) | 101 | 670 | ||||||||||||||||
Earnings from continuing operations |
3,402 | 2,895 | 3,415 | 2,878 | 809 | 384 | ||||||||||||||||||||
Loss from discontinued operations, net of taxes |
(188 | ) | (194 | ) | (188 | ) | (194 | ) | (188 | ) | (193 | ) | ||||||||||||||
Net earnings |
3,214 | 2,701 | 3,227 | 2,684 | 621 | 191 | ||||||||||||||||||||
Less net earnings (loss) attributable to noncontrolling interests |
105 | 12 | 118 | (5 | ) | (13 | ) | 17 | ||||||||||||||||||
Net earnings attributable to the Company |
3,109 | 2,689 | 3,109 | 2,689 | 634 | 174 | ||||||||||||||||||||
Preferred stock dividends declared |
(75 | ) | (75 | ) | (75 | ) | (75 | ) | | | ||||||||||||||||
Net earnings attributable to GE common shareowners |
$ | 3,034 | $ | 2,614 | $ | 3,034 | $ | 2,614 | $ | 634 | $ | 174 | ||||||||||||||
Amounts attributable to the Company |
||||||||||||||||||||||||||
Earnings from continuing operations |
$ | 3,297 | $ | 2,883 | $ | 3,297 | $ | 2,883 | $ | 822 | $ | 367 | ||||||||||||||
Loss from discontinued operations, net of taxes |
(188 | ) | (194 | ) | (188 | ) | (194 | ) | (188 | ) | (193 | ) | ||||||||||||||
Net earnings attributable to the Company |
$ | 3,109 | $ | 2,689 | $ | 3,109 | $ | 2,689 | $ | 634 | $ | 174 | ||||||||||||||
Per-share amounts |
||||||||||||||||||||||||||
Earnings from continuing operations |
||||||||||||||||||||||||||
Diluted earnings per share |
$ | 0.30 | $ | 0.26 | ||||||||||||||||||||||
Basic earnings per share |
$ | 0.30 | $ | 0.26 | ||||||||||||||||||||||
Net earnings |
||||||||||||||||||||||||||
Diluted earnings per share |
$ | 0.28 | $ | 0.25 | ||||||||||||||||||||||
Basic earnings per share |
$ | 0.28 | $ | 0.25 | ||||||||||||||||||||||
Dividends declared per common share |
$ | 0.10 | $ | 0.10 |
(a) | Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis. |
See Note 3 for other-than-temporary impairment amounts.
See accompanying notes. Separate information is shown for GE and Financial Services (GECS). Transactions between GE and GECS have been eliminated from the Consolidated columns.
(3)
General Electric Company and consolidated affiliates
Condensed Statement of Earnings
Six months ended June 30 (Unaudited) | ||||||||||||||||||||||||||
Consolidated | GE(a) | Financial Services (GECS) | ||||||||||||||||||||||||
(In millions, except share amounts) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||
Sales of goods |
$ | 28,670 | $ | 29,978 | $ | 28,225 | $ | 29,514 | $ | 449 | $ | 478 | ||||||||||||||
Sales of services |
19,507 | 20,227 | 19,687 | 20,520 | | | ||||||||||||||||||||
Other income |
628 | 462 | 680 | 559 | | | ||||||||||||||||||||
GECS earnings from continuing operations |
| | 1,361 | 1,346 | | | ||||||||||||||||||||
GECS revenues from services |
25,244 | 26,879 | | | 25,870 | 27,436 | ||||||||||||||||||||
Total revenues |
74,049 | 77,546 | 49,953 | 51,939 | 26,319 | 27,914 | ||||||||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||
Cost of goods sold |
21,701 | 23,883 | 21,286 | 23,509 | 419 | 388 | ||||||||||||||||||||
Cost of services sold |
13,007 | 12,987 | 13,186 | 13,280 | | | ||||||||||||||||||||
Interest and other financial charges |
8,332 | 9,980 | 773 | 724 | 7,808 | 9,589 | ||||||||||||||||||||
Investment contracts, insurance losses and insurance annuity benefits |
1,469 | 1,525 | | | 1,557 | 1,596 | ||||||||||||||||||||
Provision for losses on financing receivables |
4,272 | 5,153 | | | 4,272 | 5,153 | ||||||||||||||||||||
Other costs and expenses |
18,154 | 18,270 | 7,126 | 6,920 | 11,370 | 11,600 | ||||||||||||||||||||
Total costs and expenses |
66,935 | 71,798 | 42,371 | 44,433 | 25,426 | 28,326 | ||||||||||||||||||||
Earnings (loss) from continuing operations before income taxes |
7,114 | 5,748 | 7,582 | 7,506 | 893 | (412 | ) | |||||||||||||||||||
Benefit (provision) for income taxes |
(1,316 | ) | 82 | (1,774 | ) | (1,739 | ) | 458 | 1,821 | |||||||||||||||||
Earnings from continuing operations |
5,798 | 5,830 | 5,808 | 5,767 | 1,351 | 1,409 | ||||||||||||||||||||
Loss from discontinued operations, |
||||||||||||||||||||||||||
net of taxes |
(578 | ) | (215 | ) | (578 | ) | (215 | ) | (575 | ) | (197 | ) | ||||||||||||||
Net earnings |
5,220 | 5,615 | 5,230 | 5,552 | 776 | 1,212 | ||||||||||||||||||||
Less net earnings (loss) attributable to |
||||||||||||||||||||||||||
noncontrolling interests |
166 | 97 | 176 | 34 | (10 | ) | 63 | |||||||||||||||||||
Net earnings attributable to the Company |
5,054 | 5,518 | 5,054 | 5,518 | 786 | 1,149 | ||||||||||||||||||||
Preferred stock dividends declared |
(150 | ) | (150 | ) | (150 | ) | (150 | ) | | | ||||||||||||||||
Net earnings attributable to GE common shareowners |
$ | 4,904 | $ | 5,368 | $ | 4,904 | $ | 5,368 | $ | 786 | $ | 1,149 | ||||||||||||||
Amounts attributable to the Company |
||||||||||||||||||||||||||
Earnings from continuing operations |
$ | 5,632 | $ | 5,733 | $ | 5,632 | $ | 5,733 | $ | 1,361 | $ | 1,346 | ||||||||||||||
Loss from discontinued operations, net of taxes |
(578 | ) | (215 | ) | (578 | ) | (215 | ) | (575 | ) | (197 | ) | ||||||||||||||
Net earnings attributable to the Company |
$ | 5,054 | $ | 5,518 | $ | 5,054 | $ | 5,518 | $ | 786 | $ | 1,149 | ||||||||||||||
Per-share amounts |
||||||||||||||||||||||||||
Earnings from continuing operations |
||||||||||||||||||||||||||
Diluted earnings per share |
$ | 0.51 | $ | 0.53 | ||||||||||||||||||||||
Basic earnings per share |
$ | 0.51 | $ | 0.53 | ||||||||||||||||||||||
Net earnings |
||||||||||||||||||||||||||
Diluted earnings per share |
$ | 0.45 | $ | 0.51 | ||||||||||||||||||||||
Basic earnings per share |
$ | 0.46 | $ | 0.51 | ||||||||||||||||||||||
Dividends declared per common share |
$ | 0.20 | $ | 0.41 |
(a) | Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis. |
See Note 3 for other-than-temporary impairment amounts.
See accompanying notes. Separate information is shown for GE and Financial Services (GECS). Transactions between GE and GECS have been eliminated from the Consolidated columns.
(4)
General Electric Company and consolidated affiliates
Condensed Statement of Financial Position
Consolidated | GE(a) | Financial Services (GECS) | ||||||||||||||||||||||||
June 30, | December 31, | June 30, | December 31, | June 30, | December 31, | |||||||||||||||||||||
(In million, except share amounts) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||
Cash and equivalents |
$ | 73,848 | $ | 72,260 | $ | 12,861 | $ | 8,654 | $ | 61,547 | $ | 64,356 | ||||||||||||||
Investment securities |
42,102 | 51,941 | 21 | 30 | 42,083 | 51,913 | ||||||||||||||||||||
Current receivables |
17,589 | 16,458 | 9,471 | 9,818 | | | ||||||||||||||||||||
Inventories |
11,366 | 11,987 | 11,295 | 11,916 | 71 | 71 | ||||||||||||||||||||
Financing receivables net |
324,145 | 329,232 | | | 333,262 | 336,926 | ||||||||||||||||||||
Other GECS receivables |
8,577 | 14,177 | | | 13,093 | 18,752 | ||||||||||||||||||||
Property, plant and equipment net |
65,358 | 69,212 | 11,668 | 12,495 | 53,690 | 56,717 | ||||||||||||||||||||
Investment in GECS |
| | 67,267 | 70,833 | | | ||||||||||||||||||||
Goodwill |
63,094 | 65,574 | 35,951 | 36,613 | 27,143 | 28,961 | ||||||||||||||||||||
Other intangible assets net |
10,946 | 11,929 | 8,153 | 8,450 | 2,793 | 3,479 | ||||||||||||||||||||
All other assets |
98,363 | 103,417 | 16,991 | 17,097 | 82,432 | 87,471 | ||||||||||||||||||||
Assets of businesses held for sale |
33,289 | 34,111 | 32,690 | 33,986 | 599 | 125 | ||||||||||||||||||||
Assets of discontinued operations |
1,253 | 1,520 | 50 | 50 | 1,203 | 1,470 | ||||||||||||||||||||
Total assets(b) |
$ | 749,930 | $ | 781,818 | $ | 206,418 | $ | 209,942 | $ | 617,916 | $ | 650,241 | ||||||||||||||
Liabilities and equity |
||||||||||||||||||||||||||
Short-term borrowings |
$ | 120,154 | $ | 130,252 | $ | 289 | $ | 504 | $ | 121,011 | $ | 131,137 | ||||||||||||||
Accounts payable, principally trade accounts |
14,230 | 19,703 | 10,101 | 10,373 | 8,184 | 13,275 | ||||||||||||||||||||
Progress collections and price adjustments accrued |
10,868 | 12,192 | 11,514 | 12,957 | | | ||||||||||||||||||||
Other GE current liabilities |
14,313 | 14,527 | 14,313 | 14,527 | | | ||||||||||||||||||||
Non-recourse borrowings of consolidated securitization entities |
33,411 | 3,883 | | | 33,411 | 3,883 | ||||||||||||||||||||
Bank deposits |
37,471 | 38,923 | | | 37,471 | 38,923 | ||||||||||||||||||||
Long-term borrowings |
298,701 | 337,134 | 9,617 | 11,681 | 289,768 | 326,391 | ||||||||||||||||||||
Investment contracts, insurance liabilities and insurance annuity benefits |
30,529 | 31,641 | | | 31,015 | 32,009 | ||||||||||||||||||||
All other liabilities |
55,349 | 58,861 | 34,904 | 35,232 | 20,565 | 23,756 | ||||||||||||||||||||
Deferred income taxes |
2,434 | 2,173 | (4,217 | ) | (4,620 | ) | 6,651 | 6,793 | ||||||||||||||||||
Liabilities of businesses held for sale |
10,364 | 6,092 | 10,103 | 6,037 | 261 | 55 | ||||||||||||||||||||
Liabilities of discontinued operations |
1,381 | 1,301 | 167 | 163 | 1,214 | 1,138 | ||||||||||||||||||||
Total liabilities(b) |
629,205 | 656,682 | 86,791 | 86,854 | 549,551 | 577,360 | ||||||||||||||||||||
Preferred stock (30,000 shares outstanding at both June 30, 2010 and December 31, 2009) |
| | | | | | ||||||||||||||||||||
Common stock (10,691,220,000 and 10,663,075,000 shares outstanding at June 30, 2010 and December 31, 2009, respectively) |
702 | 702 | 702 | 702 | 1 | 1 | ||||||||||||||||||||
Accumulated other comprehensive income net(c) |
||||||||||||||||||||||||||
Investment securities |
291 | (435 | ) | 291 | (435 | ) | 289 | (436 | ) | |||||||||||||||||
Currency translation adjustments |
(3,319 | ) | 3,836 | (3,319 | ) | 3,836 | (2,636 | ) | 1,372 | |||||||||||||||||
Cash flow hedges |
(1,290 | ) | (1,734 | ) | (1,290 | ) | (1,734 | ) | (1,268 | ) | (1,769 | ) | ||||||||||||||
Benefit plans |
(16,008 | ) | (16,932 | ) | (16,008 | ) | (16,932 | ) | (369 | ) | (434 | ) | ||||||||||||||
Other capital |
37,357 | 37,729 | 37,357 | 37,729 | 27,583 | 27,591 | ||||||||||||||||||||
Retained earnings |
127,436 | 126,363 | 127,436 | 126,363 | 43,667 | 44,508 | ||||||||||||||||||||
Less common stock held in treasury |
(31,235 | ) | (32,238 | ) | (31,235 | ) | (32,238 | ) | | | ||||||||||||||||
Total GE shareowners equity |
113,934 | 117,291 | 113,934 | 117,291 | 67,267 | 70,833 | ||||||||||||||||||||
Noncontrolling interests(d) |
6,791 | 7,845 | 5,693 | 5,797 | 1,098 | 2,048 | ||||||||||||||||||||
Total equity |
120,725 | 125,136 | 119,627 | 123,088 | 68,365 | 72,881 | ||||||||||||||||||||
Total liabilities and equity |
$ | 749,930 | $ | 781,818 | $ | 206,418 | $ | 209,942 | $ | 617,916 | $ | 650,241 | ||||||||||||||
(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) | Our consolidated assets at June 30, 2010 include total assets of $53,755 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $42,786 million and investment securities of $7,126 million. Our consolidated liabilities at June 30, 2010 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GE. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $32,696 million. See Note 16. |
(c) | The sum of accumulated other comprehensive incomenet was $(20,326) million and $(15,265) million at June 30, 2010 and December 31, 2009, respectively. |
(d) | Included accumulated other comprehensive incomenet attributable to noncontrolling interests of $(185) million and $(188) million at June 30, 2010 and December 31, 2009, 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.
(5)
General Electric Company and consolidated affiliates
Condensed Statement of Cash Flows
Six months ended June 30 (Unaudited) | ||||||||||||||||||||||||||
Consolidated | GE(a) | Financial Services (GECS) | ||||||||||||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||||
Cash flows operating activities |
||||||||||||||||||||||||||
Net earnings |
$ | 5,220 | $ | 5,615 | $ | 5,230 | $ | 5,552 | $ | 776 | $ | 1,212 | ||||||||||||||
Less net earnings attributable to noncontrolling interests |
166 | 97 | 176 | 34 | (10 | ) | 63 | |||||||||||||||||||
Net earnings attributable to the Company |
5,054 | 5,518 | 5,054 | 5,518 | 786 | 1,149 | ||||||||||||||||||||
Loss from discontinued operations |
578 | 215 | 578 | 215 | 575 | 197 | ||||||||||||||||||||
Adjustments to reconcile net earnings attributable to the Company to cash provided from operating activities |
||||||||||||||||||||||||||
Depreciation and amortization of property, plant and equipment |
4,856 | 5,235 | 1,075 | 1,107 | 3,781 | 4,128 | ||||||||||||||||||||
Earnings from continuing operations retained by GECS |
| | (1,361 | ) | (1,346 | ) | | | ||||||||||||||||||
Deferred income taxes |
(1,615 | ) | (1,150 | ) | (422 | ) | 29 | (1,193 | ) | (1,179 | ) | |||||||||||||||
Decrease (increase) in GE current receivables |
892 | 2,187 | 559 | 2,836 | | | ||||||||||||||||||||
Decrease (increase) in inventories |
522 | 210 | 559 | 246 | | 4 | ||||||||||||||||||||
Increase (decrease) in accounts payable |
593 | (984 | ) | 201 | (651 | ) | 502 | (1,278 | ) | |||||||||||||||||
Increase (decrease) in GE progress collections |
(1,452 | ) | (675 | ) | (1,486 | ) | (651 | ) | | | ||||||||||||||||
Provision for losses on GECS financing receivables |
4,272 | 5,153 | | | 4,272 | 5,153 | ||||||||||||||||||||
All other operating activities |
2,919 | (10,131 | ) | 1,557 | (259 | ) | 1,564 | (9,839 | ) | |||||||||||||||||
Cash from (used for) operating activities continuing operations |
16,619 | 5,578 | 6,314 | 7,044 | 10,287 | (1,665 | ) | |||||||||||||||||||
Cash from (used for) operating activities discontinued operations |
(92 | ) | (44 | ) | | | (92 | ) | (44 | ) | ||||||||||||||||
Cash from (used for) operating activities |
16,527 | 5,534 | 6,314 | 7,044 | 10,195 | (1,709 | ) | |||||||||||||||||||
Cash flows investing activities |
||||||||||||||||||||||||||
Additions to property, plant and equipment |
(3,019 | ) | (4,459 | ) | (937 | ) | (1,325 | ) | (2,204 | ) | (3,299 | ) | ||||||||||||||
Dispositions of property, plant and equipment |
2,501 | 2,605 | | | 2,501 | 2,605 | ||||||||||||||||||||
Net decrease (increase) in GECS financing receivables |
16,669 | 25,944 | | | 17,312 | 25,450 | ||||||||||||||||||||
Proceeds from principal business dispositions |
2,678 | 9,032 | 1,683 | 186 | 825 | 8,846 | ||||||||||||||||||||
Payments for principal businesses purchased |
(19 | ) | (5,973 | ) | (19 | ) | (336 | ) | | (5,637 | ) | |||||||||||||||
Capital contribution from GE to GECS |
| | | (9,500 | ) | | | |||||||||||||||||||
All other investing activities |
8,898 | 5 | (91 | ) | (14 | ) | 8,963 | 1,027 | ||||||||||||||||||
Cash from (used for) investing activities continuing operations |
27,708 | 27,154 | 636 | (10,989 | ) | 27,397 | 28,992 | |||||||||||||||||||
Cash from (used for) investing activities discontinued operations |
26 | 48 | | | 26 | 48 | ||||||||||||||||||||
Cash from (used for) investing activities |
27,734 | 27,202 | 636 | (10,989 | ) | 27,423 | 29,040 | |||||||||||||||||||
Cash flows financing activities |
||||||||||||||||||||||||||
Net increase (decrease) in borrowings (maturities of 90 days or less) |
(1,357 | ) | (22,964 | ) | (1,063 | ) | 1,564 | (537 | ) | (25,512 | ) | |||||||||||||||
Net increase (decrease) in bank deposits |
748 | (6,450 | ) | | | 748 | (6,450 | ) | ||||||||||||||||||
Newly issued debt (maturities longer than 90 days) |
31,661 | 49,890 | 4,116 | 1,330 | 27,291 | 48,691 | ||||||||||||||||||||
Repayments and other reductions (maturities longer than 90 days) |
(68,140 | ) | (40,681 | ) | (3,218 | ) | (1,559 | ) | (64,922 | ) | (39,122 | ) | ||||||||||||||
Net dispositions (purchases) of GE shares for treasury |
178 | 484 | 178 | 484 | | | ||||||||||||||||||||
Dividends paid to shareowners |
(2,287 | ) | (6,705 | ) | (2,287 | ) | (6,705 | ) | | | ||||||||||||||||
Capital contribution from GE to GECS |
| | | | | 9,500 | ||||||||||||||||||||
All other financing activities |
(1,637 | ) | (2,143 | ) | (162 | ) | (293 | ) | (1,475 | ) | (1,850 | ) | ||||||||||||||
Cash from (used for) financing activities continuing operations |
(40,834 | ) | (28,569 | ) | (2,436 | ) | (5,179 | ) | (38,895 | ) | (14,743 | ) | ||||||||||||||
Cash from (used for) financing activities discontinued operations |
| | | | | | ||||||||||||||||||||
Cash from (used for) financing activities |
(40,834 | ) | (28,569 | ) | (2,436 | ) | (5,179 | ) | (38,895 | ) | (14,743 | ) | ||||||||||||||
Effect of currency exchange rate changes on cash |
||||||||||||||||||||||||||
and equivalents |
(1,905 | ) | (34 | ) | (307 | ) | 19 | (1,598 | ) | (53 | ) | |||||||||||||||
Increase (decrease) in cash and equivalents |
1,522 | 4,133 | 4,207 | (9,105 | ) | (2,875 | ) | 12,535 | ||||||||||||||||||
Cash and equivalents at beginning of year |
72,444 | 48,367 | 8,654 | 12,090 | 64,540 | 37,666 | ||||||||||||||||||||
Cash and equivalents at June 30 |
73,966 | 52,500 | 12,861 | 2,985 | 61,665 | 50,201 | ||||||||||||||||||||
Less cash and equivalents of discontinued operations at June 30 |
118 | 184 | | | 118 | 184 | ||||||||||||||||||||
Cash and equivalents of continuing operations at June 30 |
$ | 73,848 | $ | 52,316 | $ | 12,861 | $ | 2,985 | $ | 61,547 | $ | 50,017 | ||||||||||||||
(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 17.
(6)
General Electric Company and consolidated affiliates
Three months ended June 30 (Unaudited) |
Six months ended June 30 (Unaudited) |
|||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues |
||||||||||||||||
Energy Infrastructure(a) |
$ | 9,540 | $ | 10,459 | $ | 18,195 | $ | 19,541 | ||||||||
Technology Infrastructure(a) |
9,061 | 9,637 | 17,720 | 19,160 | ||||||||||||
NBC Universal |
3,750 | 3,565 | 8,070 | 7,089 | ||||||||||||
GE Capital(a) |
12,297 | 12,736 | 24,628 | 26,511 | ||||||||||||
Home & Business Solutions(a) |
2,250 | 2,169 | 4,190 | 4,093 | ||||||||||||
Total segment revenues |
36,898 | 38,566 | 72,803 | 76,394 | ||||||||||||
Corporate items and eliminations |
546 | 542 | 1,246 | 1,152 | ||||||||||||
Consolidated revenues |
$ | 37,444 | $ | 39,108 | $ | 74,049 | $ | 77,546 | ||||||||
Segment profit(b) |
||||||||||||||||
Energy Infrastructure(a) |
$ | 1,910 | $ | 1,863 | $ | 3,391 | $ | 3,181 | ||||||||
Technology Infrastructure(a) |
1,554 | 1,743 | 2,957 | 3,445 | ||||||||||||
NBC Universal |
607 | 539 | 806 | 930 | ||||||||||||
GE Capital(a) |
830 | 431 | 1,437 | 1,460 | ||||||||||||
Home & Business Solutions(a) |
143 | 90 | 214 | 135 | ||||||||||||
Total segment profit |
5,044 | 4,666 | 8,805 | 9,151 | ||||||||||||
Corporate items and eliminations |
(331 | ) | (538 | ) | (626 | ) | (955 | ) | ||||||||
GE interest and other financial charges |
(430 | ) | (348 | ) | (773 | ) | (724 | ) | ||||||||
GE provision for income taxes |
(986 | ) | (897 | ) | (1,774 | ) | (1,739 | ) | ||||||||
Earnings from continuing operations attributable |
||||||||||||||||
to the Company |
3,297 | 2,883 | 5,632 | 5,733 | ||||||||||||
Loss from discontinued operations, net of taxes, attributable to the Company |
(188 | ) | (194 | ) | (578 | ) | (215 | ) | ||||||||
Consolidated net earnings attributable to the Company |
$ | 3,109 | $ | 2,689 | $ | 5,054 | $ | 5,518 | ||||||||
(a) | Effective January 1, 2010, we reorganized our segments. We have reclassified prior-period amounts to conform to the current-period presentation. See Note 1 for a description of the reorganization. |
(b) | Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations, earnings attributable to noncontrolling interests of consolidated subsidiaries and accounting changes, and may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from acquisitions or dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segments management is measured excluded in determining segment profit, which we sometimes refer to as operating profit, for Energy Infrastructure, Technology Infrastructure, NBC Universal and Home & Business Solutions; included in determining segment profit, which we sometimes refer to as net earnings, for GE Capital. |
See accompanying notes to condensed, consolidated financial statements.
(7)
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 for the year ended December 31, 2009, included in our Form 8-K filed on May 6, 2010, which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in our 2009 consolidated financial statements, 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.
Effective January 1, 2010, we reorganized our segments to better align our Consumer & Industrial and Energy businesses for growth. As a result of this reorganization, we created a new segment called Home & Business Solutions that includes the Appliances and Lighting businesses from our previous Consumer & Industrial segment and the retained portion of the GE Fanuc Intelligent Platforms business of our previous Enterprise Solutions business (formerly within our Technology Infrastructure segment). In addition, the Industrial business of our previous Consumer & Industrial segment and the Sensing & Inspection Technologies and Digital Energy businesses of our previous Enterprise Solutions business are now part of the Energy business within the Energy Infrastructure segment. The Security business of Enterprise Solutions is reported in Corporate Items and Eliminations for periods prior to its sale in the first quarter of 2010. Also, effective January 1, 2010, the Capital Finance segment was renamed GE Capital and includes all of the continuing operations of General Electric Capital Corporation (GECC). In addition, the Transportation Financial Services business, previously reported in GE Capital Aviation Services (GECAS), is now included in Commercial Lending and Leasing (CLL) and our Consumer business in Italy, previously reported in Consumer, is now included in CLL. GE includes Energy Infrastructure, Technology Infrastructure, NBC Universal (NBCU) and Home & Business Solutions. GECS includes GE Capital.
Beginning in the first quarter of 2010, we have included a separate line on the statement of cash flows for the effect of currency exchange rate changes on cash and equivalents. We had previously included the effect of currency exchange rate changes on cash and equivalents in All other operating activities for GE and All other investing activities for GECS, as the effect was insignificant.
We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations.
Accounting Changes
On January 1, 2010, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2009-16 and ASU 2009-17, amendments to Accounting Standards Codification (ASC) 860, Transfers and Servicing, and ASC 810, Consolidation, respectively (ASU 2009-16 & 17). ASU 2009-16 eliminates the Qualified Special Purpose Entity (QSPE) concept, and ASU 2009-17 requires that all such entities be evaluated for consolidation as Variable Interest Entities (VIEs). Adoption of these amendments resulted in the consolidation of all of our sponsored QSPEs. In addition, we consolidated assets of VIEs related to direct investments in entities that hold loans and fixed income securities, a media joint venture and a small number of companies to which we have extended loans in the ordinary course of business and subsequently were subject to a troubled debt restructuring (TDR).
(8)
We consolidated the assets and liabilities of these entities at amounts at which they would have been reported in our financial statements had we always consolidated them. We also deconsolidated certain entities where we did not meet the definition of the primary beneficiary under the revised guidance; however the effect was insignificant at January 1, 2010. The incremental effect on total assets and liabilities, net of our investment in these entities, was an increase of $31,097 million and $33,042 million, respectively, at January 1, 2010. The net reduction of total equity (including noncontrolling interests) was $1,945 million at January 1, 2010, principally related to the reversal of previously recognized securitization gains as a cumulative effect adjustment to retained earnings. See Note 16 for additional information.
The amended guidance on ASC 860 changed existing derecognition criteria in a manner that significantly narrows the types of transactions that will qualify as sales. The revised criteria apply to transfers of financial assets occurring after December 31, 2009.
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 2009 consolidated financial statements. 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.
2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
Assets and Liabilities of Businesses Held for Sale
NBC Universal
On December 3, 2009, we entered into an agreement with Comcast Corporation to transfer the assets of the NBCU business to a newly formed entity, which will consist of our NBCU businesses and Comcast Corporation's cable networks, regional sports networks, certain digital properties and certain unconsolidated investments. Pursuant to the transaction, we currently expect to receive $6,400 million in cash ($7.1 billion less certain adjustments based on various events between contract signing and closing) and will own a 49% interest in the newly formed entity. The transaction is subject to receipt of various regulatory approvals and is expected to close within the next six months.
We also entered into an agreement whereby we will acquire approximately 38% of Vivendis interest in NBCU for $2,000 million on September 26, 2010, if the transaction described above has not yet closed. Provided the transaction subsequently closes, we will acquire the remaining Vivendi NBCU interest for $3,578 million and make an additional payment of $222 million related to the previously purchased shares. If the entity formation transaction closes before September 26, 2010, we will purchase Vivendis entire ownership interest in NBCU (20%) for $5,800 million.
Prior to the sale, NBCU will borrow approximately $9,100 million from third-party lenders and distribute the cash to us. We expect to realize approximately $7,900 million in cash after debt reduction, transaction fees and the buyout of the Vivendi interest in NBCU.
(9)
With respect to our 49% interest in the newly formed entity, we will hold redemption rights which, if exercised, cause the entity to purchase half of our ownership interest after 3.5 years and the remaining half after 7 years subject to certain exceptions, conditions and limitations. Our interest will also be subject to call provisions which, if exercised, allow Comcast Corporation to purchase our interest at specified times subject to certain exceptions. The redemption price for such transactions is determined pursuant to a formula specified in the agreement.
Subsequent to the close of the transaction, we will account for our 49% interest in the newly formed entity under the equity method.
On March 19, 2010, NBCU entered into a three-year credit agreement and a 364-day bridge loan agreement and on April 30, 2010, issued $4,000 million of senior, unsecured notes with maturities ranging from 2015 to 2040, in connection with the $9,100 million financing described above. If the transaction has not closed before June 10, 2011 or such earlier date as the master agreement governing the transaction is terminated, NBCU will redeem the senior, unsecured notes at a redemption price equal to 101% of the aggregate principal amount.
At June 30, 2010, NBCU assets and liabilities of $32,688 million and $10,103 million, respectively, were classified as held for sale. The major classes of assets are current receivables ($1,932 million), property, plant and equipment net ($1,939 million), goodwill and other intangible assets net ($22,212 million) and all other assets ($6,482 million), including film and television production costs of $4,379 million. The major classes of liabilities are accounts payable ($427 million), other GE current liabilities ($3,751 million), all other liabilities ($1,115 million) and long-term borrowings ($4,810 million).
At December 31, 2009, we classified the NBCU assets and liabilities of $32,150 million and $5,751 million, respectively, as held for sale. The major classes of assets are current receivables ($2,136 million), property, plant and equipment net ($1,805 million), goodwill and other intangible assets net ($21,574 million) and all other assets ($6,514 million), including film and television production costs of $4,507 million. The major classes of liabilities are accounts payable ($398 million), other GE current liabilities ($4,051 million) and all other liabilities ($1,300 million).
Other
On February 28, 2010, we completed the sale of our Security business for $1,787 million. Assets and liabilities of $1,780 million and $282 million, respectively, were classified as held for sale at December 31, 2009.
In June 2010, we committed to sell our GE Capital Consumer businesses in Indonesia and Argentina. Assets of $571 million and liabilities of $212 million were classified as held for sale at June 30, 2010.
(10)
Summarized financial information for businesses held for sale is shown below.
(In millions) | June 30, 2010 |
December 31, 2009 | ||||
Assets |
||||||
Cash and equivalents |
$ | 62 | $ | | ||
Current receivables |
1,932 | 2,188 | ||||
Financing receivables net |
467 | | ||||
Property, plant and equipment net |
1,973 | 1,978 | ||||
Goodwill |
19,599 | 20,086 | ||||
Other intangible assets net |
2,639 | 2,866 | ||||
All other assets |
6,484 | 6,621 | ||||
Other |
133 | 372 | ||||
Assets of businesses held for sale |
$ | 33,289 | $ | 34,111 | ||
Liabilities |
||||||
Accounts payable |
$ | 448 | $ | 451 | ||
Other GE current liabilities |
3,755 | 4,139 | ||||
All other liabilities |
1,219 | 1,447 | ||||
Long-term borrowings |
4,810 | 2 | ||||
Other |
132 | 53 | ||||
Liabilities of businesses held for sale |
$ | 10,364 | $ | 6,092 | ||
Discontinued Operations
Discontinued operations comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC) and Plastics. Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
Summarized financial information for discontinued GECS operations is shown below.
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Total revenues |
$ | (2 | ) | $ | (2 | ) | $ | (3 | ) | $ | (8 | ) | ||||
Loss from discontinued operations, net of taxes |
||||||||||||||||
Loss from operations |
$ | (3 | ) | $ | (62 | ) | $ | (9 | ) | $ | (70 | ) | ||||
Loss on disposal |
(185 | ) | (131 | ) | (566 | ) | (127 | ) | ||||||||
Total loss from discontinued operations, net of taxes |
$ | (188 | ) | $ | (193 | ) | $ | (575 | ) | $ | (197 | ) | ||||
Assets of GECS discontinued operations were $1,203 million and $1,470 million at June 30, 2010 and December 31, 2009, respectively, and primarily comprised a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business. Liabilities of GECS discontinued operations were $1,214 million and $1,138 million at June 30, 2010 and December 31, 2009, respectively. During the first six months of 2010, we recorded incremental reserves of $566 million related to interest refund claims on the 2008 sale of GE Money Japan. During the first quarter of 2010, we also reduced tax reserves by $325 million related to resolution of an uncertain tax position in Japan, but were required to record an offsetting valuation allowance on our deferred tax asset in Japan.
(11)
GE Money Japan
During the third quarter of 2007, we committed to a plan to sell Lake upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. As a result, we recognized an after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361 million. In connection with the sale, we 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 loss-sharing terms specified in the agreement, with all claims in excess of 258 billion Japanese Yen (approximately $2,900 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009.
We update our estimate of our share of expected losses quarterly. We recorded a reserve of $132 million in the second quarter of 2009 for our estimated share of incremental losses under the loss-sharing provisions of the agreement based on our experience at that time. In the last several months, our overall claims experience has developed unfavorably. While the number of new claims continues to decline from 2009, the pace of the decline has been slower than expected and claims severity has increased. We believe that the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. During the first quarter of 2010, we accrued $380 million of incremental reserves for these claims. In the second quarter of 2010, we accrued an additional $186 million of reserves for these claims. As of June 30, 2010, our liability for reimbursement of claims in excess of the statutory interest rate was $697 million.
The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. We continue to monitor incoming claims activity relative to our expected claims levels. Our current expectations are that the pace of incoming claims continues to decelerate, average exposure per claim remains consistent with recent levels and we see the impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant impact on the total amount of our liability. For example, our current model assumes incoming claims continue to decline at a rate of 11% per month. June daily claims declined at a rate higher than assumed in our model. Holding all other assumptions constant, if claims were to decline at rates of 9%, 6% or 3% and we assume no impact from our loss mitigation efforts, our estimate of our liability would increase by approximately $100 million, $400 million and $1,200 million, respectively.
Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, may continue to have an adverse effect on claims development. We will continue to review our estimated exposure quarterly, and make adjustments if required.
GE Money Japan revenues from discontinued operations were an insignificant amount in both the second quarter of 2010 and 2009 and both the first six months of 2010 and 2009, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $188 million and $136 million in the second quarters of 2010 and 2009, respectively, and $571 million and $132 million in the first six months of 2010 and 2009, respectively.
WMC
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC revenues from discontinued operations were $(2) million in both the second quarters of 2010 and 2009, and $(3) million and $(9) million in the first six months of 2010 and 2009, respectively. In total, WMCs earnings (loss) from discontinued operations, net of taxes, were $1 million and $(5) million in the second quarters of 2010 and 2009, respectively, and $(3) million and $(11) million in the first six months of 2010 and 2009, respectively.
(12)
GE Industrial
GE industrial loss from discontinued operations, net of taxes, were $1 million in the second quarter of 2009 and $3 million and $18 million in the first six months of 2010 and 2009, respectively. There were no GE industrial losses from discontinued operations in the second quarter of 2010. The sum of GE industrial loss from discontinued operations, net of taxes, and GECS loss from discontinued operations, net of taxes, are reported as GE industrial loss from discontinued operations, net of taxes, on the Condensed Statement of Earnings.
Assets of GE industrial discontinued operations were $50 million at both June 30, 2010 and December 31, 2009. Liabilities of GE industrial discontinued operations were $167 million and $163 million at June 30, 2010, and December 31, 2009, respectively, and primarily represent taxes payable and pension liabilities related to the sale of our Plastics business in 2007.
3. INVESTMENT SECURITIES
Substantially all of our investment securities are classified as available-for-sale. These 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) in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our global banks. None of our securities are classified as held to maturity.
At | ||||||||||||||||||||||||||||||
June 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||
(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 |
$ | 4 | $ | | $ | | $ | 4 | $ | 12 | $ | 4 | $ | (1 | ) | $ | 15 | |||||||||||||
Equity available-for-sale |
17 | | | 17 | 14 | 1 | | 15 | ||||||||||||||||||||||
21 | | | 21 | 26 | 5 | (1 | ) | 30 | ||||||||||||||||||||||
GECS |
||||||||||||||||||||||||||||||
Debt |
||||||||||||||||||||||||||||||
U.S. corporate |
21,914 | 1,691 | (442 | ) | 23,163 | 23,410 | 981 | (756 | ) | 23,635 | ||||||||||||||||||||
State and municipal |
2,876 | 108 | (207 | ) | 2,777 | 2,006 | 34 | (246 | ) | 1,794 | ||||||||||||||||||||
Residential mortgage- backed(a) |
3,455 | 123 | (492 | ) | 3,086 | 4,005 | 79 | (766 | ) | 3,318 | ||||||||||||||||||||
Commercial mortgage-backed |
2,993 | 144 | (260 | ) | 2,877 | 3,053 | 89 | (440 | ) | 2,702 | ||||||||||||||||||||
Asset-backed |
2,908 | 86 | (235 | ) | 2,759 | 2,994 | 48 | (305 | ) | 2,737 | ||||||||||||||||||||
Corporate non-U.S. |
2,301 | 99 | (104 | ) | 2,296 | 1,831 | 59 | (50 | ) | 1,840 | ||||||||||||||||||||
Government non-U.S. |
2,585 | 78 | (43 | ) | 2,620 | 2,902 | 63 | (29 | ) | 2,936 | ||||||||||||||||||||
U.S. government and federal agency |
1,380 | 66 | (26 | ) | 1,420 | 2,628 | 46 | | 2,674 | |||||||||||||||||||||
Retained interests(b) |
58 | 9 | (26 | ) | 41 | 8,479 | 392 | (40 | ) | 8,831 | ||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||
Available-for-sale |
540 | 123 | (39 | ) | 624 | 489 | 242 | (5 | ) | 726 | ||||||||||||||||||||
Trading |
420 | | | 420 | 720 | | | 720 | ||||||||||||||||||||||
41,430 | 2,527 | (1,874 | ) | 42,083 | 52,517 | 2,033 | (2,637 | ) | 51,913 | |||||||||||||||||||||
Eliminations |
(2 | ) | | | (2 | ) | (2 | ) | | | (2 | ) | ||||||||||||||||||
Total |
$ | 41,449 | $ | 2,527 | $ | (1,874 | ) | $ | 42,102 | $ | 52,541 | $ | 2,038 | $ | (2,638 | ) | $ | 51,941 | ||||||||||||
(a) | Substantially collateralized by U.S. mortgages. Of our total RMBS portfolio at June 30, 2010, $2,039 million relates to securities issued by government sponsored entities and $1,047 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions. |
(b) | Included $1,918 million of retained interests at December 31, 2009 accounted for at fair value in accordance with ASC 815, Derivatives and Hedging. See Note 16. |
(13)
The fair value of investment securities decreased to $42,102 million at June 30, 2010, from $51,941 million at December 31, 2009, primarily driven by a decrease in retained interests as a result of our adoption of ASU 2009-16 & 17 and maturities, partially offset by improved market conditions.
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 |
||||||||||
June 30, 2010 |
||||||||||||||
Debt |
||||||||||||||
U.S. corporate |
$ | 1,373 | $ | (43 | ) | $ | 3,216 | $ | (399 | ) | ||||
State and municipal |
431 | (23 | ) | 531 | (184 | ) | ||||||||
Residential mortgage-backed |
692 | (2 | ) | 1,356 | (490 | ) | ||||||||
Commercial mortgage-backed |
366 | (3 | ) | 1,327 | (257 | ) | ||||||||
Asset-backed |
192 | (22 | ) | 959 | (213 | ) | ||||||||
Corporate non-U.S. |
486 | (32 | ) | 726 | (72 | ) | ||||||||
Government non-U.S. |
724 | (3 | ) | 135 | (40 | ) | ||||||||
U.S. government and federal agency |
250 | (26 | ) | | | |||||||||
Retained interests |
| | 14 | (26 | ) | |||||||||
Equity |
209 | (38 | ) | 6 | (1 | ) | ||||||||
Total |
$ | 4,723 | $ | (192 | ) | $ | 8,270 | $ | (1,682 | ) | ||||
December 31, 2009 |
||||||||||||||
Debt |
||||||||||||||
U.S. corporate |
$ | 3,146 | $ | (88 | ) | $ | 4,881 | $ | (669 | ) | ||||
State and municipal |
592 | (129 | ) | 535 | (117 | ) | ||||||||
Residential mortgage-backed |
118 | (14 | ) | 1,678 | (752 | ) | ||||||||
Commercial mortgage-backed |
167 | (5 | ) | 1,293 | (435 | ) | ||||||||
Asset-backed |
126 | (11 | ) | 1,342 | (294 | ) | ||||||||
Corporate non-U.S. |
374 | (18 | ) | 481 | (32 | ) | ||||||||
Government non-U.S. |
399 | (4 | ) | 224 | (25 | ) | ||||||||
U.S. government and federal agency |
| | | | ||||||||||
Retained interests |
208 | (16 | ) | 27 | (24 | ) | ||||||||
Equity |
92 | (2 | ) | 10 | (3 | ) | ||||||||
Total |
$ | 5,222 | $ | (287 | ) | $ | 10,471 | $ | (2,351 | ) | ||||
We adopted amendments to ASC 320 and recorded a cumulative effect adjustment to increase retained earnings as of April 1, 2009 of $62 million.
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the first six months of 2010 have not changed from those described in our 2009 consolidated financial statements. See Note 3 in our 2009 consolidated financial statements, for additional information regarding these methodologies and inputs.
(14)
During the second quarter of 2010, we recorded pre-tax, other-than-temporary impairments of $101 million, of which $56 million was recorded through earnings and $45 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $381 million. During the second quarter, we recognized first time impairments of $36 million and incremental charges on previously impaired securities of $17 million. These amounts included $7 million related to securities that were subsequently sold.
During the six months of 2010, we recorded pre-tax, other-than-temporary impairments of $259 million, of which $135 million was recorded through earnings and $124 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $340 million. During the first six months of 2010, we recognized first time impairments of $92 million and incremental charges on previously impaired securities of $35 million. These amounts included $39 million related to securities that were subsequently sold.
During the three months ended June 30, 2009, we recorded pre-tax, other-than-temporary impairments of $306 million, of which $205 million was recorded through earnings, and $101 million was recorded in AOCI. At April 1, 2009 cumulative impairments recognized in earnings associated with debt securities still held were $258 million. During the second quarter, we recognized first time impairments of $26 million and incremental charges on previously impaired securities of $150 million. There were no securities sold that had previously been impaired.
During the first six months ended June 30, 2009, we recognized impairments of $603 million. Of the $603 million, $33 million was reclassified to retained earnings at April 1, 2009, as a result of the amendments to ASC 320, Investments Debt and Equity Securities. Subsequent to April 1, 2009, first time and incremental credit impairments were $26 million and $150 million, respectively. There were no securities sold that had previously been impaired.
Contractual Maturities of GECS Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
(In millions) |
Amortized cost |
Estimated fair value | ||||
Due in |
||||||
2010 |
$ | 2,878 | $ | 2,907 | ||
2011-2014 |
6,221 | 6,420 | ||||
2015-2019 |
4,202 | 4,245 | ||||
2020 and later |
17,755 | 18,704 |
We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.
Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GE |
||||||||||||||||
Gains |
$ | | $ | | $ | | $ | | ||||||||
Losses, including impairments |
| (107 | ) | | (172 | ) | ||||||||||
Net |
| (107 | ) | | (172 | ) | ||||||||||
GECS |
||||||||||||||||
Gains |
40 | 35 | 133 | 59 | ||||||||||||
Losses, including impairments |
(62 | ) | (115 | ) | (144 | ) | (354 | ) | ||||||||
Net |
(22 | ) | (80 | ) | (11 | ) | (295 | ) | ||||||||
Total |
$ | (22 | ) | $ | (187 | ) | $ | (11 | ) | $ | (467 | ) | ||||
(15)
Although we generally do not have the intent to sell any specific securities at the end of the period, 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. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.
Proceeds from investment securities sales and early redemptions by the issuer totaled $3,641 million and $1,491 million in the second quarters of 2010 and 2009, respectively, and $7,588 million and $3,633 million in the first six months of 2010 and 2009, respectively, principally from the sales of short-term securities in our bank subsidiaries.
We recognized net pre-tax gains on trading securities of $4 million and $204 million in the second quarters of 2010 and 2009, respectively, and $19 million and $244 million in the first six months of 2010 and 2009, respectively.
4. INVENTORIES
Inventories consisted of the following.
At | ||||||||
(In millions) | June 30, 2010 |
December 31, 2009 |
||||||
Raw materials and work in process |
$ | 6,894 | $ | 7,581 | ||||
Finished goods |
4,301 | 4,176 | ||||||
Unbilled shipments |
664 | 759 | ||||||
11,859 | 12,516 | |||||||
Less revaluation to LIFO |
(493 | ) | (529 | ) | ||||
Total |
$ | 11,366 | $ | 11,987 | ||||
5. GECS FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
GECS financing receivables net, consisted of the following.
At | ||||||||||||
(In millions) | June 30, 2010 |
January 1, 2010(a) |
December 31, 2009 |
|||||||||
Loans, net of deferred income |
$ | 294,016 | $ | 331,710 | $ | 290,586 | ||||||
Investment in financing leases, net of deferred income |
48,339 | 55,209 | 54,445 | |||||||||
342,355 | 386,919 | 345,031 | ||||||||||
Less allowance for losses |
(9,093 | ) | (9,805 | ) | (8,105 | ) | ||||||
Financing receivables net(b) |
$ | 333,262 | $ | 377,114 | $ | 336,926 | ||||||
(a) | Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010. |
(b) | Financing receivables at June 30, 2010 and December 31, 2009 included $1,621 million and $2,704 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per ASC 310, Receivables. |
(16)
Effective January 1, 2009, loans acquired in a business acquisition are recorded at fair value, which incorporates our estimate at the acquisition date of the credit losses over the remaining life of the portfolio. As a result, the allowance for loan losses is not carried over at acquisition. This may result in lower reserve coverage ratios prospectively. Details of financing receivables net follow.
At | ||||||||||||
(In millions) | June 30, 2010 |
January 1, 2010(a) |
December 31, 2009 |
|||||||||
CLL(b) |
||||||||||||
Americas |
$ | 93,042 | $ | 99,666 | $ | 87,496 | ||||||
Europe |
36,067 | 43,403 | 41,455 | |||||||||
Asia |
11,914 | 13,159 | 13,202 | |||||||||
Other |
2,727 | 2,836 | 2,836 | |||||||||
143,750 | 159,064 | 144,989 | ||||||||||
Consumer(b) |
||||||||||||
Non-U.S. residential mortgages |
48,013 | 58,345 | 58,345 | |||||||||
Non-U.S. installment and revolving credit |
21,783 | 24,976 | 24,976 | |||||||||
U.S. installment and revolving credit |
42,946 | 47,171 | 23,190 | |||||||||
Non-U.S. auto |
10,012 | 13,344 | 13,344 | |||||||||
Other |
9,764 | 11,688 | 11,688 | |||||||||
132,518 | 155,524 | 131,543 | ||||||||||
Real Estate |
44,006 | 48,673 | 44,841 | |||||||||
Energy Financial Services |
7,472 | 7,790 | 7,790 | |||||||||
GECAS(b) |
12,337 | 13,254 | 13,254 | |||||||||
Other(c) |
2,272 | 2,614 | 2,614 | |||||||||
342,355 | 386,919 | 345,031 | ||||||||||
Less allowance for losses |
(9,093 | ) | (9,805 | ) | (8,105 | ) | ||||||
Total |
$ | 333,262 | $ | 377,114 | $ | 336,926 | ||||||
(a) | Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010. |
(b) | During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation. |
(c) | Consisted of loans and financing leases related to certain consolidated, liquidating securitization entities. |
Individually impaired loans are defined by U.S. generally accepted accounting principles (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. The vast majority of our consumer and a portion of our CLL nonearning receivables are excluded from this definition, as they represent smaller balance homogeneous loans that we evaluate collectively by portfolio for impairment. An analysis of impaired loans and specific reserves follows.
(17)
At | ||||||||||
(In millions) | June 30, 2010 |
January 1, 2010(a) |
December 31, 2009 | |||||||
Loans requiring allowance for losses |
$ | 11,515 | $ | 9,541 | $ | 9,145 | ||||
Loans expected to be fully recoverable |
3,924 | 3,914 | 3,741 | |||||||
Total impaired loans |
$ | 15,439 | $ | 13,455 | $ | 12,886 | ||||
Allowance for losses (specific reserves) |
$ | 3,033 | $ | 2,376 | $ | 2,331 | ||||
Average investment during the period |
14,182 | (c | ) | 8,493 | ||||||
Interest income earned while impaired(b) |
206 | (c | ) | 227 |
(a) | Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010. |
(b) | Recognized principally on cash basis. |
(c) | Not applicable. |
Impaired loans increased by $1,984 million from January 1, 2010, to June 30, 2010, primarily relating to increases at Real Estate. Impaired loans consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business. We regularly review our Real Estate loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loan-to-value ratios. We classify Real Estate loans as impaired when the most recent valuation reflects a projected loan-to-value ratio at maturity in excess of 100%, even if the loan is currently paying in accordance with contractual terms. The increase in impaired loans and related specific reserves at Real Estate reflects our current estimate of collateral values of the underlying properties, and our estimate of loans which are not past due, but for which it is probable that we will be unable to collect the full principal balance at maturity due to a decline in the underlying value of the collateral. Of our $8,281 million impaired loans at Real Estate at June 30, 2010, $5,892 million are currently paying in accordance with the contractual terms of the loan. Impaired loans at CLL primarily represent senior secured lending positions.
Our loss mitigation strategy intends to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a TDR. Such loans are classified as impaired, and specific reserves are determined based upon the present value of expected future cash flows discounted at the loans original effective interest rate, or collateral value as a practical expedient in accordance with the requirements of ASC 310-10-35. As of June 30, 2010, TDRs included in impaired loans were $5,942 million, primarily relating to Real Estate ($2,127 million), Consumer ($1,918 million) and CLL ($1,835 million). TDRs consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business ($364 million).
(18)
GECS Allowance for Losses on Financing Receivables
(In millions) | Balance December 31, 2009 |
Adoption of ASU 2009- 16 & 17 (a) |
Balance January 1, 2010 |
Provision charged to operations |
Other(b) | Gross write-offs |
Recoveries | Balance June 30, 2010 | ||||||||||||||||||||
CLL(c) |
||||||||||||||||||||||||||||
Americas |
$ | 1,179 | $ | 66 | $ | 1,245 | $ | 630 | $ | (10 | ) | $ | (558 | ) | $ | 55 | $ | 1,362 | ||||||||||
Europe |
575 | | 575 | 137 | (70 | ) | (288 | ) | 28 | 382 | ||||||||||||||||||
Asia |
244 | (10 | ) | 234 | 108 | (23 | ) | (94 | ) | 9 | 234 | |||||||||||||||||
Other |
11 | | 11 | (1 | ) | (2 | ) | | | 8 | ||||||||||||||||||
Consumer(c) |
||||||||||||||||||||||||||||
Non-U.S. residential mortgages |
949 | | 949 | 184 | (105 | ) | (187 | ) | 51 | 892 | ||||||||||||||||||
Non-U.S. installment and revolving credit |
1,181 | | 1,181 | 652 | (114 | ) | (987 | ) | 288 | 1,020 | ||||||||||||||||||
U.S. installment and revolving credit |
1,698 | 1,602 | 3,300 | 1,604 | (1 | ) | (2,400 | ) | 251 | 2,754 | ||||||||||||||||||
Non-U.S. auto |
308 | | 308 | 71 | (43 | ) | (204 | ) | 102 | 234 | ||||||||||||||||||
Other |
300 | | 300 | 165 | (34 | ) | (217 | ) | 43 | 257 | ||||||||||||||||||
Real Estate |
1,494 | 42 | 1,536 | 645 | (11 | ) | (374 | ) | 1 | 1,797 | ||||||||||||||||||
Energy Financial Services |
28 | | 28 | 24 | 1 | | | 53 | ||||||||||||||||||||
GECAS(c) |
104 | | 104 | 35 | | (89 | ) | | 50 | |||||||||||||||||||
Other |
34 | | 34 | 18 | | (3 | ) | 1 | 50 | |||||||||||||||||||
Total |
$ | 8,105 | $ | 1,700 | $ | 9,805 | $ | 4,272 | $ | (412 | ) | $ | (5,401 | ) | $ | 829 | $ | 9,093 | ||||||||||
(a) | Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010. |
(b) | Other primarily included the effects of currency exchange. |
(c) | During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation. |
(19)
(In millions) | Balance January 1, 2009 |
Provision charged to operations |
Other(a) | Gross write-offs |
Recoveries | Balance June 30, 2009 | ||||||||||||||
CLL(b) |
||||||||||||||||||||
Americas |
$ | 843 | $ | 736 | $ | (33 | ) | $ | (457 | ) | $ | 44 | $ | 1,133 | ||||||
Europe |
311 | 323 | | (192 | ) | 36 | 478 | |||||||||||||
Asia |
163 | 120 | (6 | ) | (85 | ) | 7 | 199 | ||||||||||||
Other |
4 | 3 | 2 | (1 | ) | | 8 | |||||||||||||
Consumer(b) |
||||||||||||||||||||
Non-U.S. residential mortgages |
381 | 560 | 59 | (231 | ) | 59 | 828 | |||||||||||||
Non-U.S. installment and revolving credit |
1,049 | 891 | 65 | (1,092 | ) | 228 | 1,141 | |||||||||||||
U.S. installment and revolving credit |
1,700 | 1,729 | (497 | ) | (1,438 | ) | 81 | 1,575 | ||||||||||||
Non-U.S. auto |
203 | 242 | 26 | (297 | ) | 90 | 264 | |||||||||||||
Other |
226 | 160 | (16 | ) | (163 | ) | 27 | 234 | ||||||||||||
Real Estate |
301 | 344 | 10 | (85 | ) | | 570 | |||||||||||||
Energy Financial Services |
58 | 32 | 2 | | | 92 | ||||||||||||||
GECAS(b) |
58 | 1 | (1 | ) | | | 58 | |||||||||||||
Other |
28 | 12 | 1 | (14 | ) | | 27 | |||||||||||||
Total |
$ | 5,325 | $ | 5,153 | $ | (388 | ) | $ | (4,055 | ) | $ | 572 | $ | 6,607 | ||||||
(a) | Other primarily included the effects of securitization activity and currency exchange. |
(b) | During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation. |
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment net, consisted of the following.
At | ||||||||
(In millions) | June 30, 2010 |
December 31, 2009 |
||||||
Original cost |
$ | 108,976 | $ | 113,315 | ||||
Less accumulated depreciation and amortization |
(43,618 | ) | (44,103 | ) | ||||
Property, plant and equipment net |
$ | 65,358 | $ | 69,212 | ||||
(20)
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets net, consisted of the following.
At | ||||||
(In millions) | June 30, 2010 |
December 31, 2009 | ||||
Goodwill |
$ | 63,094 | $ | 65,574 | ||
Other intangible assets |
||||||
Intangible assets subject to amortization |
$ | 10,842 | $ | 11,824 | ||
Indefinite-lived intangible assets(a) |
104 | 105 | ||||
Total |
$ | 10,946 | $ | 11,929 | ||
(a) | Indefinite-lived intangible assets principally comprised trademarks and tradenames. |
Changes in goodwill balances follow.
(In millions) | Balance January 1, 2010 |
Acquisitions | Dispositions, currency exchange and other |
Balance June 30, 2010 | |||||||||
Energy Infrastructure |
$ | 12,777 | $ | | $ | (340 | ) | $ | 12,437 | ||||
Technology Infrastructure |
22,648 | 13 | (158 | ) | 22,503 | ||||||||
GE Capital |
28,961 | | (1,818 | ) | 27,143 | ||||||||
Home & Business Solutions |
1,188 | | (177 | ) | 1,011 | ||||||||
Total |
$ | 65,574 | $ | 13 | $ | (2,493 | ) | $ | 63,094 | ||||
Goodwill balances decreased $2,480 million during the first six months of 2010, primarily as a result of the stronger U.S. dollar ($1,780 million) and the deconsolidation of Regency Energy Partners L.P. (Regency) at GE Capital ($557 million).
On May 26, 2010, we sold our general partnership interest in Regency, a midstream natural gas services provider, and retained a 21% limited partnership interest. This resulted in the deconsolidation of Regency and the remeasurement of our limited partnership interest to fair value. We recorded a pre-tax gain of $119 million, which is reported in GECS revenues from services.
(21)
Intangible Assets Subject to Amortization
At | ||||||||||||||||||||
June 30, 2010 | December 31, 2009 | |||||||||||||||||||
(In millions) | Gross carrying amount |
Accumulated amortization |
Net | Gross carrying amount |
Accumulated amortization |
Net | ||||||||||||||
Customer-related |
$ | 5,826 | $ | (1,523 | ) | $ | 4,303 | $ | 6,044 | $ | (1,392 | ) | $ | 4,652 | ||||||
Patents, licenses and trademarks |
5,301 | (2,404 | ) | 2,897 | 5,198 | (2,177 | ) | 3,021 | ||||||||||||
Capitalized software |
6,491 | (4,201 | ) | 2,290 | 6,549 | (4,127 | ) | 2,422 | ||||||||||||
Lease valuations |
1,643 | (831 | ) | 812 | 1,754 | (793 | ) | 961 | ||||||||||||
Present value of future profits |
889 | (452 | ) | 437 | 921 | (470 | ) | 451 | ||||||||||||
All other |
399 | (296 | ) | 103 | 745 | (428 | ) | 317 | ||||||||||||
Total |
$ | 20,549 | $ | (9,707 | ) | $ | 10,842 | $ | 21,211 | $ | (9,387 | ) | $ | 11,824 | ||||||
Consolidated amortization related to intangible assets subject to amortization was $452 million and $553 million for the three months ended June 30, 2010 and 2009, respectively. Consolidated amortization related to intangible assets subject to amortization for the six months ended June 30, 2010 and 2009, was $858 million and $1,013 million, respectively.
(22)
8. GECS BORROWINGS AND BANK DEPOSITS
GECS borrowings are summarized in the following table.
At | ||||||
(In millions) | June 30, 2010 |
December 31, 2009 | ||||
Short-term borrowings |
||||||
Commercial paper |
||||||
U.S. |
$ | 36,330 | $ | 37,775 | ||
Non-U.S. |
9,647 | 9,525 | ||||
Current portion of long-term borrowings(a)(b)(c) |
63,000 | 69,883 | ||||
GE Interest Plus notes(d) |
8,354 | 7,541 | ||||
Other(c) |
3,680 | 6,413 | ||||
GECS short-term borrowings |
$ | 121,011 | $ | 131,137 | ||
Long-term borrowings |
||||||
Senior unsecured notes(a)(b) |
$ | 269,641 | $ | 305,306 | ||
Subordinated notes(e) |
2,411 | 2,686 | ||||
Subordinated debentures(f) |
6,952 | 7,647 | ||||
Other(c)(g) |
10,764 | 10,752 | ||||
GECS long-term borrowings |
$ | 289,768 | $ | 326,391 | ||
Non-recourse borrowings of consolidated securitization entities(h) |
$ | 33,411 | $ | 3,883 | ||
Bank deposits(i) |
$ | 37,471 | $ | 38,923 | ||
Total borrowings and bank deposits |
$ | 481,661 | $ | 500,334 | ||
(a) | GECC had issued and outstanding $58,045 million and $59,336 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at June 30, 2010 and December 31, 2009, respectively. Of the above amounts $13,000 million and $5,841 million is included in current portion of long-term borrowings at June 30, 2010 and December 31, 2009, respectively. |
(b) | Included in total long-term borrowings was $2,624 million and $3,138 million of obligations to holders of guaranteed investment contracts at June 30, 2010 and December 31, 2009, respectively. GECC could be required to repay up to approximately $2,500 million if its long-term credit rating were to fall below AA/Aa3 or its short-term credit rating were to fall below A1+/P1. |
(c) | Included $10,400 million and $10,604 million of secured funding at June 30, 2010 and December 31, 2009, respectively, of which $3,795 million and $5,667 million is non-recourse to GECS at June 30, 2010 and December 31, 2009, respectively. |
(d) | Entirely variable denomination floating rate demand notes. |
(e) | Included $417 million of subordinated notes guaranteed by GE at both June 30, 2010 and December 31, 2009. |
(f) | Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million. |
(g) | Included $1,533 million and $1,649 million of covered bonds at June 30, 2010 and December 31, 2009, respectively. If the short-term credit rating of GECC were reduced below A1/P1, GECC would be required to partially cash collateralize these bonds in an amount up to $707 million. |
(h) | Included at June 30, 2010 was $2,100 million of commercial paper, $11,674 million of current portion of long-term borrowings and $19,637 million of long-term borrowings related to former QSPEs consolidated on January 1, 2010 upon our adoption of ASU 2009-16 & 17, previously consolidated liquidating securitization entities and other on-book securitization borrowings. Included at December 31, 2009, was $2,424 million of commercial paper, $378 million of current portion of long-term borrowings and $1,081 million of long-term borrowings issued by consolidated liquidating securitization entities. See Note 16. |
(i) | Included $19,816 million and $21,252 million of deposits in non-U.S. banks at June 30, 2010 and December 31, 2009, respectively, and $10,882 million and $10,476 million of certificates of deposits distributed by brokers with maturities greater than one year at June 30, 2010 and December 31, 2009, respectively. |
(23)
9. POSTRETIREMENT BENEFIT PLANS
We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans include the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Other pension plans include the U.S. and non-U.S. pension plans with pension assets or obligations greater than $50 million. Smaller pension plans and other retiree benefit plans are not material individually or in the aggregate. The effect on operations of the pension plans follows.
Principal Pension Plans | ||||||||||||||||
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Expected return on plan assets |
$ | (1,084 | ) | $ | (1,127 | ) | $ | (2,170 | ) | $ | (2,253 | ) | ||||
Service cost for benefits earned |
277 | 336 | 569 | 689 | ||||||||||||
Interest cost on benefit obligation |
667 | 665 | 1,342 | 1,334 | ||||||||||||
Prior service cost amortization |
59 | 80 | 119 | 161 | ||||||||||||
Net actuarial loss amortization |
329 | 83 | 662 | 173 | ||||||||||||
Pension plans cost |
$ | 248 | $ | 37 | $ | 522 | $ | 104 | ||||||||
Other Pension Plans | ||||||||||||||||
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Expected return on plan assets |
$ | (124 | ) | $ | (105 | ) | $ | (254 | ) | $ | (211 | ) | ||||
Service cost for benefits earned |
62 | 82 | 144 | 165 | ||||||||||||
Interest cost on benefit obligation |
120 | 109 | 244 | 221 | ||||||||||||
Prior service cost amortization |
4 | 3 | 8 | 5 | ||||||||||||
Net actuarial loss amortization |
52 | 27 | 111 | 56 | ||||||||||||
Pension plans cost |
$ | 114 | $ | 116 | $ | 253 | $ | 236 | ||||||||
The effect on operations of principal retiree health and life insurance plans follows.
Principal Retiree Health and Life Insurance Plans | ||||||||||||||||
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Expected return on plan assets |
$ | (29 | ) | $ | (32 | ) | $ | (58 | ) | $ | (64 | ) | ||||
Service cost for benefits earned |
54 | 85 | 112 | 159 | ||||||||||||
Interest cost on benefit obligation |
175 | 177 | 350 | 354 | ||||||||||||
Prior service cost amortization |
158 | 168 | 316 | 336 | ||||||||||||
Net actuarial gain amortization |
(6 | ) | (27 | ) | (12 | ) | (54 | ) | ||||||||
Retiree benefit plans cost |
$ | 352 | $ | 371 | $ | 708 | $ | 731 | ||||||||
(24)
10. INCOME TAXES
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) | June 30, 2010 |
December 31, 2009 | ||||
Unrecognized tax benefits |
$ | 6,862 | $ | 7,251 | ||
Portion that, if recognized, would reduce tax expense and effective tax rate(a) |
4,648 | 4,918 | ||||
Accrued interest on unrecognized tax benefits |
1,498 | 1,369 | ||||
Accrued penalties on unrecognized tax benefits |
99 | 99 | ||||
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months |
0-2,100 | 0-1,800 | ||||
Portion that, if recognized, would reduce tax expense and effective tax rate(a) |
0-1,600 | 0-1,400 |
(a) | Some portion of such reduction may 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 that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. 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 generally settled in cash as GE tax payments are due. The effect of GECS on the amount of the consolidated tax liability from the formation of the NBCU joint venture will be settled in cash when it otherwise would have reduced the liability of the group absent the tax on formation.
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, resulting in an income tax benefit of $700 million in the first quarter of 2009.
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11. 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 June 30 | Six months ended June 30 | |||||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||
Net earnings attributable to the Company |
$ | 3,109 | $ | 2,689 | $ | 5,054 | $ | 5,518 | ||||||
Investment securities net |
633 | 1,553 | 726 | 918 | ||||||||||
Currency translation adjustments net |
(4,743 | ) | 6,545 | (7,155 | ) | 2,485 | ||||||||
Cash flow hedges net |
42 | 688 | 444 | 1,405 | ||||||||||
Benefit plans net |
526 | 240 | 924 | 479 | ||||||||||
Total |
$ | (433 | ) | $ | 11,715 | $ | (7 | ) | $ | 10,805 | ||||
On January 1, 2010, we adopted ASU 2009-16 & 17. This resulted in a reduction of GE shareowners equity primarily related to the reversal of a portion of previously recognized securitization gains. This adjustment is reflected as a cumulative effect adjustment of the opening balances of retained earnings ($1,708 million) and accumulated other comprehensive income ($265 million). See Notes 1 and 16 for additional information.
Changes to noncontrolling interests during the second quarter of 2010 resulted from net earnings $105 million, dividends $(74) million, the effects of deconsolidating Regency $(979) million, AOCI $(48) million and other $31 million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.
Changes to noncontrolling interests during the first six months of 2010 resulted from net earnings $166 million, dividends $(259) million, the effects of deconsolidating Regency $(979) million, AOCI $(47) million and other $65 million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.
Changes to noncontrolling interests during the second quarter of 2009 resulted from net earnings $12 million, dividends $(93) million, AOCI $29 million and other $(12) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.
Changes to noncontrolling interests during the first six months of 2009 resulted from net earnings $97 million, dividends $(292) million, the effects of deconsolidating Penske Truck Leasing Co., L.P. (PTL) $(331) million, AOCI $(4) million and other $(24) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.
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12. GECS REVENUES FROM SERVICES
GECS revenues from services are summarized in the following table.
Three months ended June 30 | Six months ended June 30 | |||||||||||
(In millions) | 2010 | 2009 | 2010 | 2009 | ||||||||
Interest on loans(a) |
$ | 5,604 | $ | 5,080 | $ | 11,330 | $ | 10,180 | ||||
Equipment leased to others |
2,769 | 2,927 | 5,530 | 6,412 | ||||||||
Fees(a) |
1,224 | 1,099 | 2,489 | 2,259 | ||||||||
Investment income(a)(b) |
518 | 993 | 1,086 | 1,658 | ||||||||
Financing leases(a) |
703 | 830 | 1,459 | 1,738 | ||||||||
Premiums earned by insurance activities |
490 | 500 | 979 | 1,010 | ||||||||
Net securitization gains(a) |
| 394 | | 720 | ||||||||
Real estate investments |
354 | 371 | 631 | 718 | ||||||||
Associated companies |
460 | 309 | 1,057 | 474 | ||||||||
Other items(c)(d) |
858 | 749 | 1,309 | 2,267 | ||||||||
Total |
$ | 12,980 | $ | 13,252 | $ | 25,870 | $ | 27,436 | ||||
(a) | On January 1, 2010, we adopted ASU 2009-16 & 17 which required us to consolidate substantially all of our former QSPEs. As a result, 2010 GECS Revenues from services include interest and fee income from these entities, which were not presented on a consolidated basis in 2009. Also beginning in 2010, we no longer record gains for substantially all of our securitizations as they are recorded as on-book financings. See Note 16. |
(b) | Included net other-than-temporary impairments on investment securities of $56 million and $97 million in the second quarters of 2010 and 2009, respectively, and $135 million and $329 million in the first six months of 2010 and 2009, respectively. See Note 3. |
(c) | Included a gain on the sale of a limited partnership interest in PTL and a related gain on the remeasurement of the retained investment to fair value totaling $296 million in the first quarter of 2009. |
(d) | Including a gain of $343 million on the remeasurement to fair value of our equity method investment in BAC Credomatic GECF Inc. (BAC), following our acquisition of a controlling interest in the second quarter of 2009. |
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13. EARNINGS PER SHARE INFORMATION
GEs 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 June 30 | ||||||||||||||||
2010 | 2009 | |||||||||||||||
(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(a) |
$ | 3,273 | $ | 3,273 | $ | 2,876 | $ | 2,876 | ||||||||
Preferred stock dividends declared |
(75 | ) | (75 | ) | (75 | ) | (75 | ) | ||||||||
Earnings from continuing operations attributable to common shareowners for per-share calculation |
$ | 3,198 | $ | 3,198 | $ | 2,801 | $ | 2,801 | ||||||||
Loss from discontinued operations for per-share calculation |
(188 | ) | (188 | ) | (194 | ) | (194 | ) | ||||||||
Net earnings attributable to GE common shareowners for per-share calculation |
3,011 | 3,011 | 2,607 | 2,607 | ||||||||||||
Average equivalent shares |
||||||||||||||||
Shares of GE common stock outstanding |
10,685 | 10,685 | 10,609 | 10,609 | ||||||||||||
Employee compensation-related shares, including stock options |
17 | | | | ||||||||||||
Total average equivalent shares |
10,702 | 10,685 | 10,609 | 10,609 | ||||||||||||
Per-share amounts |
||||||||||||||||
Earnings from continuing operations |
$ | 0.30 | $ | 0.30 | $ | 0.26 | $ | 0.26 | ||||||||
Loss from discontinued operations |
(0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||
Net earnings |
0.28 | 0.28 | 0.25 | 0.25 |
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Six months ended June 30 | ||||||||||||||||
2010 | 2009 | |||||||||||||||
(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(a) |
$ | 5,590 | $ | 5,589 | $ | 5,718 | $ | 5,717 | ||||||||
Preferred stock dividends declared |
(150 | ) | (150 | ) | (150 | ) | (150 | ) | ||||||||