United
States Securities and Exchange Commission
WASHINGTON,
D.C. 20549
FORM
10-K
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(Mark
One)
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þ Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the fiscal year ended December 31, 2008
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or
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¨ Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the transition period from ___________to ___________
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Commission
file number 001-00035
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General
Electric Company
(Exact
name of registrant as specified in
charter)
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New
York
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14-0689340
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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3135
Easton Turnpike, Fairfield, CT
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06828-0001
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203/373-2211
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(Address
of principal executive offices)
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(Zip
Code)
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(Telephone
No.)
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Securities
Registered Pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which registered
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Common
stock, par value $0.06 per share
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New
York Stock Exchange
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Securities
Registered Pursuant to Section 12(g) of the Act:
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(Title
of class)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes þ No ¨
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No þ
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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨
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
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer þ
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting company ¨
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ¨ No þ
The
aggregate market value of the outstanding common equity of the registrant as of
the last business day of the registrant’s most recently completed second fiscal
quarter was $265.5 billion. Affiliates of the Company beneficially own, in the
aggregate, less than one-tenth of one percent of such shares. There were
10,560,425,000 shares of voting common stock with a par value of $0.06
outstanding at January 30, 2009.
DOCUMENTS
INCORPORATED BY REFERENCE
The
definitive proxy statement relating to the registrant’s Annual Meeting of
Shareowners, to be held April 22, 2009, is incorporated by reference in Part III
to the extent described therein.
(1)
Table
of Contents
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Page
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Part I
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Business
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3
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Risk
Factors
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12
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Unresolved
Staff Comments
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16
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Properties
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17
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Legal
Proceedings
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17
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Submission
of Matters to a Vote of Security Holders
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19
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Part II
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Market
for Registrant’s Common Equity, Related Stockholder Matters and
Issuer
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Purchases
of Equity Securities
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19
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Selected
Financial Data
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21
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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22
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Quantitative
and Qualitative Disclosures About Market Risk
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67
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Financial
Statements and Supplementary Data
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67
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Changes
in and Disagreements With Accountants on Accounting
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and
Financial Disclosure
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141
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Controls
and Procedures
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141
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Other
Information
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142
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Part III
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Directors,
Executive Officers and Corporate Governance
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142
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Executive
Compensation
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143
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Security
Ownership of Certain Beneficial Owners and Management and
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Related
Stockholder Matters
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143
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Certain
Relationships and Related Transactions, and Director
Independence
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143
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Principal
Accounting Fees and Services
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143
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Part IV
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Exhibits,
Financial Statement Schedules
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143
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148
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(2)
Part
I
Item
1. Business.
General
Unless
otherwise indicated by the context, we use the terms “GE,” “GECS” and “GE
Capital” on the basis of consolidation described in Note 1 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report. Also, unless otherwise indicated by the context,
“General Electric” means the parent company, General Electric Company (the
Company).
General
Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain
executive offices at 3135 Easton Turnpike, Fairfield, CT
06828-0001.
We are
one of the largest and most diversified technology, media, and financial
services corporations in the world. With products and services ranging from
aircraft engines, power generation, water processing, and security technology to
medical imaging, business and consumer financing, media content and industrial
products, we serve customers in more than 100 countries and employ more than
300,000 people worldwide. Since our incorporation in 1892, we have
developed or acquired new technologies and services that have broadened
considerably the scope of our activities.
In
virtually all of our global business activities, we encounter aggressive and
able competition. In many instances, the competitive climate is characterized by
changing technology that requires continuing research and development, as well
as customer commitments. With respect to manufacturing operations, we believe
that, in general, we are one of the leading firms in most of the major
industries in which we participate. The NBC Television Network is one of four
major U.S. commercial broadcast television networks. NBC Universal also competes
with other film and television programming producers and distributors,
cable/satellite television networks and theme park operators. The businesses in
which GECS engages are subject to competition from various types of financial
institutions, including commercial banks, thrifts, investment banks,
broker-dealers, credit unions, leasing companies, consumer loan companies,
independent finance companies and finance companies associated with
manufacturers.
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,” 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 are described in more detail in Part I, Item 1A.
“Risk Factors” of this Form 10-K Report. We do not undertake to update our
forward-looking statements.
Our
consolidated global revenues increased to $97.2 billion in 2008, compared with
$86.3 billion in 2007 and $70.5 billion in 2006. For additional information
about our geographic operations, see the Geographic Operations section in Part
II, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of this Form 10-K Report.
(3)
Segment
revenue and profit information and additional financial data and commentary on
recent financial results for operating segments are provided in the Segment
Operations section in Part II, Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and in Note 27 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Operating
businesses that are reported as segments include Energy Infrastructure,
Technology Infrastructure, NBC Universal, Capital Finance and Consumer &
Industrial. Net earnings of GECS and the effect of transactions between segments
are eliminated to arrive at total consolidated data. A summary description of
each of our operating segments follows.
We also
continue our longstanding practice of providing supplemental information for
certain businesses within the segments.
Energy
Infrastructure
Energy
Infrastructure (21.1%, 17.8% and 16.6% of consolidated revenues in 2008, 2007
and 2006, respectively) is a leader in the field of development, implementation
and improvement of products and technologies that harness resources such as
wind, oil, gas and water.
Our
operations are located in North America, Europe, Asia, South America and
Africa.
Energy
Energy
serves power generation, industrial, government and other customers worldwide
with products and services related to energy production, distribution and
management. We offer wind turbines as part of our renewable energy portfolio,
which also includes solar technology. We also sell aircraft engine derivatives
for use as industrial power sources. Gas turbines and generators are used
principally in power plants for generation of electricity and for industrial
cogeneration and mechanical drive applications. We are a leading provider of
Integrated Gasification Combined Cycle (IGCC) technology design and development.
IGCC systems convert coal and other hydrocarbons into synthetic gas that, after
cleanup, is used as the primary fuel for gas turbines in combined-cycle systems.
IGCC systems produce fewer air pollutants compared with traditional pulverized
coal power plants. We sell steam turbines and generators to the electric utility
industry and to private industrial customers for cogeneration applications.
Nuclear reactors, fuel and support services for both new and installed boiling
water reactors are offered through joint ventures with Hitachi and Toshiba. In
addition, we design and manufacture motors and control systems used in
industrial applications primarily for oil and gas extraction and mining. We
provide our customers with total solutions to meet their needs through a
complete portfolio of aftermarket services, including equipment upgrades,
long-term maintenance service agreements, repairs, equipment installation,
monitoring and diagnostics, asset management and performance optimization tools,
remote performance testing and Dry Low NOx (DLN) tuning. We continue to invest
in advanced technology development that will provide more value to our customers
and more efficient solutions that comply with today’s strict environmental
regulations.
Energy
is party to revenue sharing programs that share the financial results of certain
aero-derivative lines. These businesses are controlled by Energy, but
counterparties have an agreed share of revenues as well as development and
component production responsibilities. At December 31, 2008, such counterparty
interests ranged from 5% to 49% of various programs; associated distributions to
such counterparties are accounted for as costs of production.
Worldwide
competition for power generation products and services is intense. Demand for
power generation is global and, as a result, is sensitive to the economic and
political environment of each country in which we do business. The balance of
regional growth and demand side management are important factors to evaluate as
we plan for future development.
Oil
& Gas
Our
technology helps oil and gas companies make more efficient and sustainable use
of the world's energy resources.
(4)
Oil
& Gas supplies mission critical equipment for the global oil and gas
industry, used in applications spanning the entire value chain from drilling and
completion through production, transportation and pipeline inspection and
including downstream processing in refineries and petrochemical plants. The
business designs and manufactures surface and subsea drilling and production
systems, equipment for floating production platforms, compressors, turbines,
turboexpanders, high pressure reactors, industrial power generation and a broad
portfolio of ancillary equipment.
To
ensure that the installed base is maintained at peak condition, our service
business has over 40 service centers and workshops in all of the world's main
oil and gas extraction and production regions. The business also provides
upgrades to customers’ machines, using the latest available technology, to
extend production capability and environmental performance.
In April
2008, Oil & Gas completed the acquisition of the Hydril Pressure Controls
business from Tenaris. This addition to the portfolio further extends GE's
capabilities in oil and gas drilling systems and opens further opportunities in
the technically challenging deep and ultra-deep subsea
applications.
Water
& Process Technologies
Water
& Process Technologies offers water treatment solutions for industrial and
municipal water systems including the supply and related services of specialty
chemicals, water purification systems, pumps, valves, filters and fluid handling
equipment for improving the performance of water, wastewater and process
systems, including mobile treatment systems and desalination
processes.
For
information about orders and backlog, see the Segment Operations section in Part
II, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of this Form 10-K Report.
Technology
Infrastructure
Technology
Infrastructure (25.4%, 24.8% and 24.9% of consolidated revenues in 2008, 2007
and 2006, respectively) is one of the world’s leading providers of essential
technologies to developed, developing and emerging countries. Around the world,
we are helping build healthcare, transportation and technology
infrastructure.
Our
operations are located in North America, Europe, Asia and South
America.
Aviation
Aviation
produces, sells and services jet engines, turboprop and turbo shaft engines, and
related replacement parts for use in military and commercial aircraft. Our
military engines are used in a wide variety of aircraft including fighters,
bombers, tankers, helicopters and surveillance aircraft, as well as marine
applications, and our commercial engines power aircraft in all categories of
range: short/medium, intermediate and long-range, as well as executive and
regional aircraft. We also produce and market engines through CFM International,
a company jointly owned by GE and Snecma, a subsidiary of SAFRAN of France, and
Engine Alliance, LLC, a company jointly owned by GE and the Pratt & Whitney
division of United Technologies Corporation. New engines are also being designed
and marketed in joint ventures with Rolls-Royce Group plc and Honda Aero, Inc.,
a division of Honda Motor Co., Ltd.
Aviation
is party to agreements that share the financial results of certain aircraft and
marine engine lines. These agreements take the form of both joint ventures and
revenue sharing programs.
Joint
ventures market and sell particular aircraft engine lines, but require
negligible direct investment because the venture parties conduct essentially all
of the development, production, assembly and aftermarket support activities.
Under these agreements, Aviation supplies certain engine components and retains
related intellectual property rights. The CFM56 engine line is the product of
CFM International and the GP7000 engine line is the product of Engine Alliance,
LLC.
Revenue
sharing programs are a standard form of cooperation for specific product
programs in the aviation industry. These businesses are controlled by Aviation,
but counterparties have an agreed share of revenues as well as development and
component production responsibilities. At December 31, 2008, such counterparty
interests ranged from 2% to 49% of various programs; associated distributions to
such counterparties are accounted for as costs of production.
(5)
Aviation
also produces global aerospace systems and equipment, including airborne
platform computing systems, power generation and distribution products,
mechanical actuation products and landing gear, plus various engine components
for use in both military and commercial aircraft.
We
provide maintenance, component repair and overhaul services (MRO), including
sales of replacement parts for many models of engines and repair and overhaul of
engines manufactured by competitors. These MRO services are often provided under
long-term maintenance contracts.
The
worldwide competition in aircraft jet engines and MRO (including parts sales) is
intense. Both U.S. and export markets are important. Product development cycles
are long and product quality and efficiency are critical to success. Research
and development expenditures are important in this business, as are focused
intellectual property strategies and protection of key aircraft engine design,
manufacture, repair and product upgrade technologies. Our products and services
are subject to a number of regulatory standards.
Potential
sales for any engine are limited by, among other things, its technological
lifetime, which may vary considerably depending upon the rate of advance in
technology, the small number of potential customers and the limited number of
relevant airframe applications. Aircraft engine orders tend to follow military
and airline procurement cycles, although these cycles differ from each
other.
Enterprise
Solutions
Enterprise
Solutions delivers integrated solutions that improve customers’ productivity and
profitability. We offer integrated solutions using sensors and non-destructive
testing, security and life safety technologies, power system protection and
control, and plant automation and embedded computing systems. From home to
industry to national security, our technology covers the full spectrum of
security solutions, including card access systems, high-tech video monitoring,
intrusion and fire detection, real estate and property control, and explosives
and narcotics detection. We design and manufacture equipment and systems that
enable customers to monitor, protect, control and ensure the safety of their
critical applications. These products include sensing instruments that measure
temperature, pressure, moisture, gas and flow rate for demanding customer
applications. Enterprise Solutions also designs, manufactures and services
inspection equipment, including radiographic, ultrasonic, remote visual and eddy
current, that monitors and tests materials without disassembling, deforming or
damaging them. We deliver automation hardware, software and embedded computing
systems designed to help users reduce costs, increase efficiency and enhance
profitability through a diverse array of capabilities and products, including
controllers, embedded systems, advanced software, motion control, computer
numerical controls, operator interfaces, industrial computers, and lasers. We
also provide protection & control, communications, power sensing and power
quality products and services that increase the reliability of electrical power
networks and critical equipment for utility, industrial and large commercial
customers. We protect and optimize assets such as generators, transmission lines
and motors, to ensure secure wireless data transmission and uninterruptible
power.
Healthcare
Healthcare
has expertise in medical imaging and information technologies, medical
diagnostics, patient monitoring systems, disease research, drug discovery and
biopharmaceutical manufacturing technologies. We are dedicated to predicting and
detecting disease earlier, monitoring its progress and informing physicians,
helping them to tailor treatment for individual patients. Healthcare
manufactures, sells and services a wide range of medical equipment that helps
provide a fast, non-invasive way for doctors to see broken bones, diagnose
trauma cases in the ER, view the heart and its function, and identify early
stages of cancers or brain disorders. With X-ray, digital mammography, Computed
Tomography (CT), Magnetic Resonance (MR) and Molecular Imaging technologies,
Healthcare creates industry-leading products that allow clinicians to see inside
the human body more clearly than ever. In addition, Healthcare manufactured
technologies include patient monitoring, diagnostic cardiology, ultrasound, bone
densitometry, anesthesiology and oxygen therapy, and neonatal and critical care
devices. Medical diagnostics and life sciences products include diagnostic
imaging agents used in medical scanning procedures, drug discovery,
biopharmaceutical manufacturing and the latest in cellular technologies.
During 2008, we acquired Whatman plc, a global supplier of filtration products
and technologies and Vital Signs, Inc., a global provider of medical products
applicable to a wide range of care areas such as anesthesia, respiratory, sleep
therapy and emergency medicine.
Our
product services include remote diagnostic and repair services for medical
equipment manufactured by GE and by others, as well as computerized data
management and customer productivity services.
(6)
We
compete with a variety of U.S. and non-U.S. manufacturers and services
operations. Technological competence and innovation, excellence in design, high
product performance, quality of services and competitive pricing are among the
key factors affecting competition for these products and services. Throughout
the world, we play a critical role in delivering new technology to improve
patient outcomes and productivity tools to help control healthcare
costs.
Our
products are subject to regulation by numerous government agencies, including
the FDA, as well as various laws that apply to claims submitted under Medicare,
Medicaid or other government funded healthcare programs.
Transportation
Transportation
provides technology solutions for customers in a variety of industries including
railroad, transit, mining, oil and gas, power generation and marine. We serve
customers in more than 100 countries.
Transportation
manufactures high-horsepower diesel-electric locomotives, including the
Evolution Series™, the most technologically advanced and most fuel efficient
locomotive, which meets or exceeds the U.S. Environmental Protection Agency’s
Tier II requirements. We also offer leading drive technology solutions to the
mining, transit, marine and stationary, and drilling industries. Our motors
operate in thousands of applications, from electrical drive systems for large
haulage trucks used in the mining industry to transit cars and drilling rigs,
and our engines are used for marine power as well as stationary power generation
applications. We also provide gearing technology for critical applications such
as wind turbines.
Transportation
also provides a portfolio of service offerings designed to improve fleet
efficiency and reduce operating expenses, including repair services, locomotive
enhancements, modernizations, and information-based services like remote
monitoring and diagnostics. We provide train control products, railway
management services, and signaling systems to increase service levels, optimize
asset utilization, and streamline operations for railroad owners and operators.
We deliver leading edge tools that improve asset availability and reliability,
optimize network planning, and control network execution to plan.
For
information about orders and backlog, see the Segment Operations section in Part
II, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of this Form 10-K Report.
NBC
Universal (9.3%, 8.9% and 10.7% of consolidated revenues in 2008, 2007 and 2006,
respectively) is a diversified media and entertainment company focused on the
development, production and marketing of entertainment, news and information to
a global audience. NBC Universal, which is 80-percent owned by General Electric
and 20-percent owned by Vivendi S.A., is engaged in the production and
distribution of film and television programming; the operation of leading
cable/satellite television networks around the world; the broadcast of network
television through owned and affiliated television stations within the United
States; and investment and programming activities in digital media and the
Internet. Our premier film company, Universal Pictures, is engaged in the
production and world-wide distribution of theatrical, home entertainment and
television programming. We own the world-renowned theme park Universal Studios
Hollywood, operate and hold an ownership interest in the Universal Studios
Florida theme parks and brand, design and develop international theme parks
under exclusive licenses. Our cable/satellite television networks provide
produced and acquired entertainment, news and information programming to
households world-wide. Our cable/satellite television networks include the USA
Network, Bravo, CNBC, the SciFi Channel, MSNBC, Oxygen, UniHD, Chiller, Sleuth,
mun2 and branded channels across Europe, Asia and Latin America. The NBC
television network is one of four major U.S. commercial broadcast television
networks. Together, the NBC television network and Telemundo, our U.S.
Spanish-language broadcast television network, serve 210 affiliated stations
within the United States. At December 31, 2008, we owned and operated 26
television stations each subject to U.S. Federal Communications Commission
regulation. We have exclusive U.S. television rights to the 2010 and 2012
Olympic Games, National Football League Sunday Night Football and the Super Bowl
in 2012.
(7)
NBC
Universal is subject to a wide range of factors, which could adversely affect
our operations. Our broadcast networks, cable television networks and television
stations are subject to advertising patterns and changes in viewer taste and
preference that can be unpredictable or unforeseen. In addition, future revenues
in these properties are dependent upon our ability to obtain, renew or
renegotiate long-term programming contracts, including event-based sports
programming and contracts for the distribution of our programming to
cable/satellite operators. Our television and film production and distribution
businesses are affected by the timing and performance of releases in the
theatrical, home entertainment and television markets. Technological advances
like digital video recorders, Internet streaming and electronic sell-through
offer entertainment options through new media, introducing uncertainty to our
operations. Other technologies enable the unauthorized copying and distribution
of our film and television programming, increasing the risk of piracy. We
continue to devote substantial resources to protect our intellectual property
against unauthorized use.
NBC
Universal’s headquarters are in New York, New York, with operations throughout
North America, Europe, South America and Asia.
Capital
Finance
Capital
Finance (36.7%, 38.4% and 37.2% of consolidated revenues in 2008, 2007 and 2006,
respectively) offers a broad range of financial products and services worldwide.
Services include commercial loans, operating leases, fleet management, financial
programs, home loans, credit cards, personal loans and other financial
services.
Within
our Capital Finance operating segment, we operate the businesses described below
along product lines. Additionally, in 2008, we have increased our focus on core
operations, ability to self-fund and restructuring low return
businesses.
Our
operations are located in North America, South America, Europe, Australia and
Asia.
Commercial
Lending and Leasing (CLL)
CLL
offers a broad range of financial services worldwide. We have particular
mid-market expertise, and offer loans, leases and other financial services to
customers, including manufacturers, distributors and end-users for a variety of
equipment and major capital assets. These assets include industrial-related
facilities and equipment; vehicles; corporate aircraft; and equipment used in
many industries, including the construction, manufacturing, transportation,
telecommunications and healthcare industries. During 2008, we made a number of
acquisitions, the most significant of which were Merrill Lynch Capital and
CitiCapital. In January 2009, we acquired Interbanca S.p.A., a leading Italian
corporate bank.
We
operate in a highly competitive environment. Our competitors include commercial
banks, investment banks, leasing companies, financing companies associated with
manufacturers, and independent finance companies. Competition related to our
lending and leasing operations is based on price, that is interest rates and
fees, as well as deal structure and terms. Profitability is affected not only by
broad economic conditions that affect customer credit quality and the
availability and cost of capital, but also by successful management of credit
risk, operating risk and market risks such as interest rate and currency
exchange risks. Success requires high quality risk management systems, customer
and industry specific knowledge, diversification, service and distribution
channels, strong collateral and asset management knowledge, deal structuring
expertise and the ability to reduce costs through technology and
productivity.
GE
Money
GE
Money, through consolidated entities and associated companies, is a leading
provider of financial services to consumers and retailers in over 50 countries
around the world. We offer a full range of innovative financial products to suit
customers’ needs. These products include, on a global basis, private-label
credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt
consolidation; home equity loans; deposit and other savings products; and small
and medium enterprise lending. In 2008, we acquired a controlling interest in
Bank BPH.
In
December 2007, we sold our U.S. mortgage business (WMC). In September 2007, we
committed to a plan to sell our Japanese personal loan business (Lake). During
the second quarter of 2008, this planned sale was expanded to GE Money Japan,
which comprises Lake and our Japanese mortgage and card businesses, excluding
our minority ownership in GE Nissen Credit Co., Ltd. This sale was completed in
the third quarter of 2008.
(8)
In June
2008, we committed to sell the GE Money businesses in Germany, Austria and
Finland, the credit card and auto businesses in the U.K., and the credit card
business in Ireland. In October 2008, we completed the sale of the GE Money
business in Germany. In January 2009, we completed the sale of the remaining
businesses, which are included in assets and liabilities of businesses held for
sale on the Statement of Financial Position at December 31, 2008.
In
December 2008, we committed to sell a portion of our Australian residential
mortgage business. This sale is expected to be executed during the first quarter
of 2009.
Our
operations are subject to a variety of bank and consumer protection regulations.
Further, a number of countries have ceilings on rates chargeable to consumers in
financial service transactions. We are subject to competition from various types
of financial institutions including commercial banks, leasing companies,
consumer loan companies, independent finance companies, manufacturers’ captive
finance companies, and insurance companies. Industry participants compete on the
basis of price, servicing capability, promotional marketing, risk management,
and cross selling. The markets in which we operate are also subject to the risks
from fluctuations in retail sales, interest and currency exchange rates, and the
consumer’s capacity to repay debt.
Real
Estate
Real
Estate offers a comprehensive range of capital and investment solutions,
including equity capital for acquisition or development, as well as fixed and
floating rate mortgages for new acquisitions or re-capitalizations of commercial
real estate worldwide. Our business finances, with both equity and loan
structures, the acquisition, refinancing and renovation of office buildings,
apartment buildings, retail facilities, hotels, parking facilities and
industrial properties. Our typical real estate loans are intermediate term,
senior, fixed or floating-rate, and are secured by existing income-producing
commercial properties. We invest in, and provide restructuring financing for,
portfolios of mortgage loans, limited partnerships and tax-exempt
bonds.
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 sales prices.
We
operate in a highly competitive environment. Our competitors include banks,
financial institutions, real estate companies, real estate investment funds and
other financial companies. Competition in our equity investment business is
primarily based on price, and competition in our lending business is primarily
based on interest rates and fees, as well as deal structure and terms. As we
compete globally, our success is sensitive to the economic and political
environment of each country in which we do business.
Energy
Financial Services
Energy
Financial Services offers structured equity, debt, leasing, partnership
financing, project finance and broad-based commercial finance to the global
energy and water industries and invests in operating assets in these industries.
Energy Financial Services also owns a controlling interest in Regency Energy
Partners LP, a midstream master limited partnership engaged in the gathering,
processing, transporting and marketing of natural gas and gas
liquids.
We
operate in a highly competitive environment. Our competitors include banks,
financial institutions, energy and water companies, and other finance and
leasing companies. Competition is primarily based on price, that is interest
rates and fees, as well as deal structure and terms. As we compete globally, our
success is sensitive to the economic and political environment of each country
in which we do business.
GE
Commercial Aviation Services (GECAS)
GECAS is
a global leader in commercial aircraft leasing and finance, delivering fleet and
financing solutions for commercial aircraft. Our airport financing unit makes
debt and equity investments primarily in mid-sized regional airports. We also
co-sponsor an infrastructure private equity fund, which invests in large
infrastructure projects including gateway airports. GECAS also has in its
portfolio a wide array of products including leases, debt and equity investments
to the global transportation industry (marine, rail and
intermodal).
We
operate in a highly competitive environment. Our competitors include aircraft
manufacturers, banks, financial institutions, equity investors, and other
finance and leasing companies. Competition is based on lease rate financing
terms, aircraft delivery dates, condition and availability, as well as available
capital demand for financing.
(9)
Consumer
& Industrial
Consumer
& Industrial (6.4%, 7.3% and 8.7% of consolidated revenues in 2008, 2007 and
2006, respectively) sells products that share several characteristics −
competitive design, efficient manufacturing and effective distribution and
service. Strong global competition rarely permits premium pricing, so cost
control, including productivity, is key. Despite pricing pressures on many of
our products, we also invest in the development of differentiated, premium
products that are more profitable. While some Consumer & Industrial products
are primarily directed to consumer applications (major appliances, for example),
and some primarily to industrial applications (switchgear, for example), others
are directed to both markets (lighting, for example).
We sell
and service major home appliances including refrigerators, freezers, electric
and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave
ovens, room air conditioners, and residential water systems for filtration,
softening and heating. Brands are GE Monogram®, GE Profile™, GE®, Hotpoint® and
GE Café™.
We
manufacture certain products, and also source finished product and component
parts from third-party global manufacturers. A large portion of our appliances
sales are through a variety of retail outlets for replacement of installed
units. Residential building contractors installing units in new construction is
our second major U.S. channel. We offer one of the largest original equipment
manufacturer (OEM) service organizations in the appliances industry, providing
in-home repair, aftermarket parts and warranty administration. We also
manufacture and sell a variety of lamp products for commercial, industrial and
consumer markets, including full lines of incandescent, halogen, fluorescent,
high-intensity discharge, light-emitting diode, automotive and miniature
products.
Consumer
& Industrial also provides integrated electrical equipment and systems used
to distribute, protect and control energy and equipment. We manufacture and
distribute electrical distribution and control products, lighting and power
panels, switchgear and circuit breakers that are used to distribute and manage
power in a variety of residential, commercial, consumer and industrial
applications. We also provide customer-focused solutions centered on the
delivery and control of electric power, and market a wide variety of commercial
lighting systems.
The
aggregate level of economic activity in markets for such products and services
generally lags overall economic slowdowns as well as subsequent recoveries. In
the U.S., industrial markets are undergoing significant structural changes
reflecting, among other factors, increased international competition and
continued commodity cost pressures.
Our
headquarters are in Louisville, Kentucky and our operations are located in North
America, Europe, Asia and Latin America.
Discontinued
Operations
Discontinued
operations comprised GE Money Japan; WMC; Plastics; Advanced Materials; GE Life,
our U.K.-based life insurance operation; the property and casualty insurance and
reinsurance businesses and the European life and health operations of GE
Insurance Solutions Corporation (GE Insurance Solutions); and Genworth
Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted
most of our consumer insurance business, including life and mortgage insurance
operations.
For
further information about discontinued operations, see Part II, Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and Note 2 to the consolidated financial statements in Part II, Item
8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Geographic
Data
Geographic
data are reported in Note 27 to the consolidated financial statements in Part
II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Additional
financial data about our geographic operations is provided in the Geographic
Operations section in Part II, Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Form 10-K
Report.
(10)
Orders
Backlog
Research
and Development
GE-funded
research and development expenditures were $3.0 billion in both 2008 and 2007,
and $2.8 billion in 2006. In addition, research and development funding from
customers, principally the U.S. government, totaled $1.3 billion, $1.1 billion
and $0.7 billion in 2008, 2007 and 2006, respectively. Technology
Infrastructure’s Aviation business accounts for the largest share of GE’s
research and development expenditures with funding from both GE and customer
funds. Technology Infrastructure’s Healthcare business and Energy
Infrastructure’s Energy business also made significant expenditures funded
primarily by GE.
Expenditures
reported above reflect the definition of research and development required by
U.S. generally accepted accounting principles. For operating and management
purposes, we consider amounts spent on product and services technology to
include our reported research and development expenditures, but also amounts for
improving our existing products and services, and the productivity of our plant,
equipment and processes. On this basis, our technology expenditures in 2008 were
$5.3 billion.
Environmental
Matters
Our
operations, like operations of other companies engaged in similar businesses,
involve the use, disposal and cleanup of substances regulated under
environmental protection laws. We are involved in a sizable number of
remediation actions to clean up hazardous wastes as required by federal and
state laws. Such statutes require that responsible parties fund remediation
actions regardless of fault, legality of original disposal or ownership of a
disposal site. Expenditures for site remediation actions amounted to
approximately $0.3 billion in 2008 and $0.2 billion in 2007. We presently expect
that such remediation actions will require average annual expenditures in the
range of $0.3 billion to $0.4 billion over the next two years.
In
November 2006, the United States Federal District Court approved a consent
decree, which had been agreed to by GE and the United States Environmental
Protection Agency (EPA), that represents a comprehensive framework for
implementation of the EPA’s 2002 decision to dredge polychlorinated biphenyl
(PCB)-containing sediments in the upper Hudson River. The dredging will be
performed in two phases with an intervening peer review of performance after the
first phase. Under the consent decree, we have committed to reimburse the EPA
for its past and future project oversight costs and to perform the first phase
of dredging, which is scheduled to proceed from May through November of 2009.
After completion of the peer review, currently scheduled for 2010, we may be
responsible for further costs. Our Statement of Financial Position as of
December 31, 2008 and 2007, included liabilities for the probable and estimable
costs of the agreed upon remediation activities.
Employee
Relations
At
year-end 2008, General Electric Company and consolidated affiliates employed
approximately 323,000 persons, of whom approximately 152,000 were employed in
the United States. For further information about employees, see Part II, Item 6.
“Selected Financial Data” of this Form 10-K Report.
Approximately
19,250 GE manufacturing and service employees in the United States are
represented for collective bargaining purposes by a total of approximately 125
different union locals. A majority of such employees are represented by union
locals that are affiliated with, and bargain in coordination with, the IUE-CWA,
The Industrial Division of the Communication Workers of America, AFL-CIO, CLC.
During 2007, General Electric Company negotiated four-year contracts with unions
representing a substantial majority of the unionized employees in the United
States. Most of these contracts will terminate in June 2011.
Approximately
3,500 staff employees (and a large number of freelance employees) in the United
States are covered by about 160 labor agreements to which NBC Universal is a
party. These agreements are with various labor unions, expire at various dates
and are generally for a term ranging from three to five years.
(11)
Executive
Officers
See Part
III, Item 10. “Directors, Executive Officers and Corporate Governance” of this
Form 10-K Report for information about Executive Officers of the
Registrant.
Other
Because
of the diversity of our products and services, as well as the wide geographic
dispersion of our production facilities, we use numerous sources for the wide
variety of raw materials needed for our operations. We have not been adversely
affected by the inability to obtain raw materials.
We own,
or hold licenses to use, numerous patents. New patents are continuously being
obtained through our research and development activities as existing patents
expire. Patented inventions are used both within the Company and are licensed to
others, but no operating segment is substantially dependent on any single patent
or group of related patents.
Agencies
of the U.S. Government constitute our largest single customer. An analysis of
sales of goods and services as a percentage of revenues follows:
|
%
of Consolidated Revenues
|
%
of GE Revenues
|
||||||||||||||||
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||
|
Total
sales to U.S. Government Agencies
|
3
|
%
|
2
|
%
|
2
|
%
|
4
|
%
|
3
|
%
|
4
|
%
|
|||||
|
Technology
Infrastructure segment
|
|||||||||||||||||
|
defense-related
sales
|
2
|
2
|
2
|
3
|
3
|
3
|
|||||||||||
GE is a
trademark and service mark of General Electric Company.
The
Company’s Internet address is www.ge.com. Our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports are available, without charge, on our website,
www.ge.com/en/company/investor/secfilings.htm, as soon as reasonably practicable
after they are filed electronically with the U.S. Securities and Exchange
Commission (SEC). Copies are also available, without charge, from GE Corporate
Investor Communications, 3135 Easton Turnpike, Fairfield, CT 06828. Reports
filed with the SEC may be viewed at www.sec.gov or obtained at the SEC Public
Reference Room in Washington, D.C. Information regarding the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
References to our website addressed in this report are provided as a convenience
and do not constitute, or should be viewed as, an incorporation by reference of
the information contained on, or available through, the website. Therefore, such
information should not be considered part of this report.
Item
1A. Risk Factors.
The
following discussion of risk factors contains “forward-looking statements,” as
discussed in Item 1. “Business”. These risk factors may be important to
understanding any statement in this Annual Report on Form 10-K or elsewhere. The
following information should be read in conjunction with Part II, Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” (MD&A), and the consolidated financial statements and related
notes in Part II, Item 8. “Financial Statements and Supplementary Data” of this
Form 10-K Report.
Our
businesses routinely encounter and address risks, some of which will cause our
future results to be different - sometimes materially different - than we
presently anticipate. Discussion about important operational risks that our
businesses encounter can be found in the MD&A section and in the business
descriptions in Item 1. “Business” of this Form 10-K Report. Below, we describe
certain important operational and strategic risks. Our reactions to material
future developments as well as our competitors’ reactions to those developments
will affect our future results.
(12)
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 recently 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 $67 billion at
the end of 2008. GE Capital has also issued term debt, mainly debt guaranteed by
the Federal Deposit Insurance Corporation under the Temporary Liquidity
Guarantee Program (TLGP) 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. 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, applying the net proceeds of our October 2008 equity offering and the
investment by Berkshire Hathaway Inc., drawing upon contractually committed
lending agreements primarily provided by global banks and/or seeking other
sources of funding. There can be no assurance, however, that the TLGP and the
CPFF will be extended beyond their scheduled expiration, or that, under such
extreme market conditions, contractually committed lending agreements and other
funding sources would be available or sufficient.
Our 2009
funding plan anticipates approximately $45 billion of senior, unsecured
long-term debt issuance. In January 2009, we completed issuances of $11.0
billion of funding under the TLGP. We also issued $5.1 billion in non-guaranteed
senior, unsecured debt with a maturity of 30 years under the non-guarantee
option of the TLGP. These issuances, along with the $13.4 billion of pre-funding
done in December 2008, bring our aggregate issuances to $29.5 billion or 66% of
our anticipated 2009 funding plan. Additionally, we anticipate that we will be
90% complete with our 2009 funding plan by June 30, 2009.
Difficult
conditions in the financial services markets have materially and adversely
affected the business and results of operations of GE Capital and we do not
expect these conditions to improve in the near future.
Dramatic
declines in the housing market, with falling home prices and increasing
foreclosures and unemployment, have resulted in significant write-downs of asset
values by financial institutions, including government-sponsored entities and
major commercial and investment banks. These write-downs, initially of
mortgage-backed securities but spreading to credit default swaps and other
derivative securities, have caused many financial institutions to seek
additional capital, to merge with other institutions and, in some cases, to
fail. Many lenders and institutional investors have reduced and, in some cases,
ceased to provide funding to borrowers including other financial institutions.
This market turmoil and tightening of credit have led to an increased level of
commercial and consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity generally. If
these conditions continue or worsen, there can be no assurance that we will be
able to recover fully the value of certain assets such as goodwill and
intangibles. In addition, although we have established
allowances for losses in GE Capital’s portfolio of financing receivables that we
believe are adequate, significant and unexpected further deterioration in the
economy and in default and recovery rates could require us to increase these
allowances and write-offs, which, depending on the amount of the increase, could
have a material adverse effect on our business, financial position and
results of operations.
(13)
The
soundness of other financial institutions could adversely affect GE
Capital.
GE
Capital has exposure to many different industries and counterparties, and
routinely executes transactions with counterparties in the financial services
industry, including brokers and dealers, commercial banks, investment banks and
other institutional clients. Many of these transactions expose GE Capital to
credit risk in the event of default of its counterparty or client. In addition,
GE Capital’s credit risk may be increased when the collateral held by it cannot
be realized upon sale or is liquidated at prices not sufficient to recover the
full amount of the loan or derivative exposure due to it. GE Capital also has
exposure to these financial institutions in the form of unsecured debt
instruments held in its investment portfolios. GE Capital has policies relating
to initial credit rating requirements and to exposure limits to counterparties
(as described in Note 29 to the consolidated financial statements in Part II,
Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report),
which mitigate credit and liquidity risk. There can be no assurance, however,
that any losses or impairments to the carrying value of financial assets would
not materially and adversely affect GE Capital’s business, financial position
and results of operations.
The
real estate markets in which GE Capital participates are highly
uncertain.
GE
Capital participates in the commercial real estate market in two ways: it
provides financing for the acquisition, refinancing and renovation of various
types of properties and it also acquires an equity position in various types of
properties. The profitability of real estate investments is largely dependent
upon the specific geographic market in which the properties are located and the
perceived value of that market at the time of sale. Such activity may vary
significantly from one year to the next. Rising unemployment, a slowdown in
general business activity and recent disruptions in the credit markets have
adversely affected, and are expected to continue to adversely affect, the value
of real estate assets GE Capital holds. Under current market and credit
conditions, there can be no assurance as to the level of sales GE Capital will
complete or the net sales proceeds it will realize. Also, there can be no
assurance that occupancy rates and market rentals will continue at their current
levels given the current economic environment during the period in which GE
Capital continues to hold its equity investments in these properties which may
result in an impairment to the carrying value of those investments.
GE
Capital is also a residential mortgage lender in certain geographic markets,
particularly in the United Kingdom, that have been and may continue to be
adversely affected by declines in residential real estate values and home sale
volumes, job losses, consumer bankruptcies and other factors that may negatively
impact the credit performance of our mortgage loans. Our allowance for loan
losses on these mortgage loans is based on our analysis of current and
historical delinquency and loan performance, as well as other management
assumptions that may be inaccurate predictions of credit performance in this
environment. There can be no assurance that, in this environment, credit
performance will not be materially worse than anticipated and, as a result,
materially and adversely affect GE Capital’s business, financial position and
results of operations.
Failure
to maintain our “Triple-A” credit ratings could adversely affect our cost of
funds and related margins, liquidity, competitive position and access to capital
markets.
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. In December 2008,
Standard & Poor’s Ratings Services affirmed our and GE Capital’s “AAA”
long-term and “A-1+” short-term corporate credit ratings but revised its ratings
outlook from stable to negative based partly on the concerns regarding GE
Capital’s future performance and funding in light of capital market turmoil. On
January 24, 2009, Moody’s Investment Services placed the long-term ratings of GE
and GE Capital on review for possible downgrade. The firm’s “Prime-1” short-term
ratings were affirmed. Moody’s said the review for downgrade is based primarily
upon heightened uncertainty regarding GE Capital’s asset quality and earnings
performance in future periods. In light of the difficulties in the financial
services industry and the difficult financial markets, there can be no assurance
that we will successfully implement our 2009 operational and funding plan for GE
Capital or, in the event of further deterioration in the financial markets, that
completion of our plan and any other steps we might take in response will be
sufficient to allow us to maintain our “Triple-A” ratings. Failure to do so
could adversely affect our cost of funds and related margins, liquidity,
competitive position and access to capital markets. Various debt instruments,
guarantees and covenants would require posting additional capital or collateral
in the event of a ratings downgrade, but none are triggered if our ratings are
reduced to AA-/Aa3 or A-1+/P-1 or higher.
(14)
Current
conditions in the global economy and the major industries we serve also may
materially and adversely affect the business and results of operations of our
non-financial businesses.
The
business and operating results of our technology infrastructure, energy
infrastructure, consumer and industrial and media businesses have been and will
continue to be affected by worldwide economic conditions and, in particular,
conditions in the air and rail transportation, energy generation, healthcare,
network television and other major industries we serve. As a result of slowing
global economic growth, the credit market crisis, declining consumer and
business confidence, increased unemployment, reduced levels of capital
expenditures, fluctuating commodity prices, bankruptcies and other challenges
currently affecting the global economy, our customers may experience
deterioration of their businesses, cash flow shortages, and difficulty obtaining
financing. As a result, existing or potential customers may delay or cancel
plans to purchase our products and services, including large infrastructure
projects, and may not be able to fulfill their obligations to us in a timely
fashion. Contract cancellations could affect our ability to fully recover our
contract costs and estimated earnings. Further, our vendors may be experiencing
similar conditions, which may impact their ability to fulfill their obligations
to us. Although the new Administration in the United States is expected to enact
various economic stimulus programs, there can be no assurance as to the timing
and effectiveness of these programs. If the global economic slowdown continues
for a significant period or there is significant further deterioration in the
global economy, our results of operations, financial position and cash flows
could be materially adversely affected.
Our
global growth is subject to economic and political risks.
We
conduct our operations in virtually every part of the world. In 2008,
approximately 53% of our revenues were attributable to activities outside the
United States. Our operations are subject to the effects of global competition.
They are also affected by local economic environments, including inflation,
recession and currency volatility. Political changes, some of which may be
disruptive, can interfere with our supply chain, our customers and all of our
activities in a particular location. While some of these risks can be hedged
using derivatives or other financial instruments and some are insurable, such
attempts to mitigate these risks are costly and not always successful, and our
ability to engage in such mitigation has decreased or become even more costly as
a result of recent market developments.
The
success of our business depends on achieving our objectives for strategic
acquisitions and dispositions.
With
respect to acquisitions and mergers, we may not be able to identify suitable
candidates at terms acceptable to us, or may not achieve expected returns and
other benefits as a result of integration challenges, such as personnel and
technology. We will continue to evaluate the potential disposition of assets and
businesses that may no longer help us meet our objectives. When we decide to
sell assets or a business, we may encounter difficulty in finding buyers or
alternative exit strategies on acceptable terms in a timely manner (as was the
case with our Consumer & Industrial business in 2008), which could delay the
accomplishment of our strategic objectives. Alternatively, we may dispose of a
business at a price or on terms that are less than we had anticipated. These
difficulties have been exacerbated in the current financial and credit
environment because some potential sellers may hold onto assets pending a
rebound in prices and buyers may have difficulty obtaining the necessary
financing. In addition, there is a risk that we may sell a business whose
subsequent performance exceeds our expectations, in which case our decision
would have potentially sacrificed enterprise value.
There
are risks inherent in owning our common stock.
The
market price and volume of our common stock have been, and may continue to be,
subject to significant fluctuations. These may arise from general stock market
conditions, the impact of the risk factors described above on our financial
condition and results of operations, a change in sentiment in the market
regarding us or our business prospects or from other factors. Changes in the
amounts and frequency of share repurchases or dividends could adversely affect
the value of our common stock.
(15)
We
are subject to a wide variety of laws and regulations.
Our
businesses are subject to regulation under a wide variety of U.S. federal, state
and foreign laws, regulations and policies. There can be no assurance that, in
response to current economic conditions, laws and regulations will not be
changed in ways that will require us to modify our business models and
objectives or affect our returns on investment by making existing practices more
restricted, subject to escalating costs or prohibited outright. In particular,
we expect U.S. and foreign governments to undertake a substantial review and
revision of the regulation and supervision of bank and non-bank financial
institutions and tax laws and regulation, which may have a significant effect on
GE Capital’s structure, operations and performance. We are also subject to
regulatory risks from laws that reduce the allowable lending rate or limit
consumer borrowing, local liquidity regulations that may increase the risk of
not being able to retrieve assets, and changes to tax law that may affect our
return on investments. For example, GE’s effective tax rate is reduced because
active business income earned and indefinitely reinvested outside the United
States is taxed at less than the U.S. rate. A significant portion of this
reduction depends upon a provision of U.S. tax law that defers the imposition of
U.S. tax on certain active financial services income until that income is
repatriated to the United States as a dividend. This provision is consistent
with international tax norms and permits U.S. financial services companies to
compete more effectively with foreign banks and other foreign financial
institutions in global markets. This provision, currently scheduled to expire at
the end of 2009, has been scheduled to expire and has been extended by Congress
on five previous occasions, including in October of 2008, but there can be no
assurance that it will continue to be extended. In the event this provision is
not extended after 2009, the current U.S. tax imposed on active financial
services income earned outside the United States would increase, making it more
difficult for U.S. financial services companies to compete in global markets. If
this provision is not extended, we expect our effective tax rate to increase
significantly after 2010.
We
are subject to legal proceedings and legal compliance risks.
We are
subject to a variety of legal proceedings and legal compliance risks. We and our
subsidiaries, our businesses and the industries in which we operate are at times
being reviewed or investigated by regulators, which could lead to enforcement
actions, fines and penalties or the assertion of private litigation claims and
damages. These include investigations by the Department of Justice Antitrust
Division and the U.S. Securities and Exchange Commission (SEC) of the marketing
and sales of guaranteed investment contracts, and other financial instruments,
to municipalities by certain subsidiaries of GE Capital and an investigation by
the SEC of possible violations of the securities laws with respect to certain
accounting issues, as described in Item 3. “Legal Proceedings” of this Form 10-K
Report. Additionally, we and our subsidiaries are involved in a sizable number
of remediation actions to clean up hazardous wastes as required by federal and
state laws. These include the dredging of polychlorinated biphenyls from a
40-mile stretch of the upper Hudson River in New York State, as described in
Item 1. “Business” of this Form 10-K Report. We are also subject to certain
other legal proceedings described in Item 3. “Legal Proceedings” of this Form
10-K Report. While we believe that we have adopted appropriate risk management
and compliance programs, the global and diverse nature of our operations means
that legal compliance risks will continue to exist and additional legal
proceedings and other contingencies, the outcome of which cannot be predicted
with certainty, will arise from time to time.
Significant
changes in actual investment return on pension assets, discount rates, and other
factors could affect our results of operations, equity, and pension
contributions in future periods.
Our
results of operations may be positively or negatively affected by the amount of
income or expense we record for our defined benefit pension plans. U.S.
generally accepted accounting principles (GAAP) require that we calculate income
or expense for the plans using actuarial valuations. These valuations reflect
assumptions about financial market and other economic conditions, which may
change based on changes in key economic indicators. The most significant
year-end assumptions we used to estimate pension income or expense for 2009 are
the discount rate and the expected long-term rate of return on plans assets. In
addition, we are required to make an annual measurement of plan assets and
liabilities, which may result in a significant change to equity through a
reduction or increase to Accumulated gains (losses) – net, Benefit plans. At the
end of 2008, the projected benefit obligation of our U.S. principal pension
plans was $45.1 billion and assets were $40.7 billion. For a discussion
regarding how our financial statements can be affected by pension plan
accounting policies, see Critical Accounting Estimates – Pension Assumptions in
Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and Note 6 to the consolidated financial statements
in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form
10-K Report. Although GAAP expense and pension funding contributions are not
directly related, key economic factors that affect GAAP expense would also
likely affect the amount of cash we would contribute to pension plans as
required under the Employee Retirement Income Security Act (ERISA).
Not
applicable.
(16)
Item
2. Properties.
Manufacturing
operations are carried out at approximately 285 manufacturing plants located in
40 states in the United States and Puerto Rico and at approximately 245
manufacturing plants located in 41 other countries.
Item
3. Legal Proceedings.
As
previously reported, in January 2005, the staff of the U.S. Securities and
Exchange Commission (SEC) informed us that it had commenced an investigation and
requested certain documents and information with respect to the use of hedge
accounting for derivatives by us and General Electric Capital Corporation. In
August 2005, the SEC staff advised us that the SEC had issued a formal order of
investigation in the matter. The SEC investigation is continuing and the SEC
staff has taken testimony in this matter and has requested information about
other GE accounting policies and practices, including items related to revenue
recognition and our cash flow presentations.
We
continue to cooperate with the ongoing SEC investigation and to discuss the
investigation and issues arising in that investigation and our internal review
of certain accounting matters with the SEC staff with a goal of completing our
review and resolving these matters. As part of this process, we have had
discussions with the SEC staff concerning resolution of these matters. In
September 2008, the SEC staff issued a “Wells notice” advising us that it is
considering recommending to the SEC that it bring a civil injunctive action
against GE for possible violations of the securities laws. We have been informed
that the issues the staff may recommend that the SEC pursue relate to the
application of SFAS 133 in 2002 and 2003 with respect to accounting for
derivatives formerly used to hedge the risk of interest rate changes related to
commercial paper and for certain derivatives in which a fee was a part of the
consideration for the derivative; a change in 2002 in our accounting for profits
on certain aftermarket spare parts primarily in our Aviation business; certain
2003 and earlier transactions involving financial intermediaries in our Rail
business; and historical accounting for revenue recognition on product sales
subject to in-transit risk of damage, principally in our Healthcare,
Infrastructure and Industrial segments. We have already disclosed these items in
previously filed SEC reports, including their effects on particular periods and
corrected our financial statements with respect to each of them. The cumulative
effect of these items on our financial statements was a reduction in net
earnings by approximately $300 million in the period from 2001 through December
31, 2007. We have implemented a number of remedial actions and internal control
enhancements, also as described in our SEC reports. All of these items were
reviewed or discussed with KPMG, which audited our financial statements
throughout the periods in question.
We
disagree with the SEC staff regarding this recommendation and have been in
discussions with the staff, including discussion of potential resolution of the
matter. We intend to continue these discussions and understand that we will have
the opportunity to address any disagreements with the SEC staff with respect to
its recommendation through the Wells process with the full Commission. If the
Commission were to authorize an action against GE, it could seek an injunction
against future violations of provisions of the federal securities laws,
including potentially Sections 13(a), 13(b), and 10(b) of the Exchange Act and
Section 17(a) of the Securities Act, the imposition of penalties, and other
relief within the Commission’s authority. If we were to resolve the matter
through a settlement, we would neither admit nor deny the proposed allegations
but could agree to the resolution and entry of an injunction. There can be no
assurance that we and the SEC would reach agreement on a proposed settlement as
a result of our discussions.
In July
and September 2008, shareholders filed two purported class actions under the
federal securities laws in the United States District Court for the District of
Connecticut naming us as defendant, as well as our chief executive officer and
chief financial officer. These two actions have been consolidated and in January
2009, a consolidated complaint was filed alleging that we and our chief
executive officer made false and misleading statements that artificially
inflated our stock price between March 12, 2008 and April 10, 2008, when we
announced that our results for the first quarter of 2008 would not meet our
previous guidance and we also lowered our full year guidance for 2008. This
case, which seeks unspecified damages, is at an early stage and we intend to
defend ourselves vigorously. In addition, in August 2008, shareholders filed two
purported derivative actions in New York State court against our chief executive
officer and chief financial officer, the members of our board and us (as nominal
defendant) for alleged breach of fiduciary duty and other claims in connection
with these events. In December 2008, the plaintiffs in these derivative actions
entered into a stipulation to dismiss the actions without
prejudice.
(17)
In
October 2008, shareholders filed a purported class action under the federal
securities laws in the United States District Court for the Southern District of
New York naming us as defendant, as well as our chief executive officer and
chief financial officer. The complaint alleges that during a conference call
with analysts on September 25, 2008, defendants made false and misleading
statements concerning (i) the state of GE’s funding, cash flows, and liquidity
and (ii) the question of issuing additional equity, which caused economic loss
to those shareholders who purchased GE stock between September 25, 2008 and
October 2, 2008, when we announced the pricing of a common stock offering. This
case, which seeks unspecified damages, is at the earliest stage and we intend to
defend ourselves vigorously.
As
previously reported, the Antitrust Division of the Department of Justice (DOJ)
and the SEC are conducting an industry-wide investigation of marketing and sales
of guaranteed investment contracts, and other financial instruments, to
municipalities. In connection with this investigation, two subsidiaries of GE
Capital have received subpoenas and requests for information in connection with
the investigation: GE Funding CMS (Trinity Funding Co.) and GE Funding Capital
Market Services, Inc. (GE FCMS). GE Capital has cooperated and continues to
cooperate fully with the SEC and DOJ in this matter. In July 2008, GE FCMS
received a “Wells notice” advising that the SEC staff is considering
recommending that the SEC bring a civil injunctive action or institute an
administrative proceeding in connection with the bidding for various financial
instruments associated with municipal securities by certain former employees of
GE FCMS. GE FCMS is one of several industry participants that received Wells
notices during 2008. GE FCMS disagrees with the SEC staff regarding this
recommendation and has been in discussions with the staff, including discussion
of potential resolution of the matter. GE FCMS intends to continue these
discussions and understands that it will have the opportunity to address any
disagreements with the SEC staff with respect to its recommendation through the
Wells process with the full Commission. In March 2008, GE FCMS and Trinity
Funding Co., LLC (Trinity Funding) were served with a federal class action
complaint asserting antitrust violations. This action has been combined with
other related actions in a multidistrict litigation proceeding in the United
States District Court for the Southern District of New York. In addition, GE
FCMS and Trinity Funding also received subpoenas from the Attorneys General of
the State of Connecticut and Florida on behalf of a working group of State
Attorneys General in June 2008. GE FCMS and Trinity Funding are cooperating with
those investigations.
In June
2008, the Environmental Protection Agency (EPA) issued a notice of violation
alleging non-compliance with the Clean Air Act at a power cogeneration plant in
Homer City, PA. The plant is operated exclusively by EME Homer City Generation
L.P., and is owned and leased to EME Homer City Generation L.P. by subsidiaries
of GE Capital. The notice of violation does not indicate a specific penalty
amount but makes reference to statutory fines. We believe that we have
meritorious defenses and that EME Homer City Generation L.P. is obligated to
indemnify GE Capital’s subsidiaries and pay all costs associated with this
matter.
As
previously reported, in April 2006 the EPA informed the company that it was
contemplating seeking $990,000 in penalties for violations of the Clean Air Act
at its Mt. Vernon, Indiana Plastics facility. The EPA asserted that the company
failed to adequately control emissions from valves and inlet pipes in an
underground piping system. We disagreed with those assertions, and the EPA
modified its position to reduce the number of potential violations. In August
2007, ownership of the facility was transferred to Sabic Innovative Plastics as
part of the sale of GE's Plastics business. Pursuant to the terms of the sale,
Sabic has agreed to take full responsibility for any civil sanctions or
corrective actions that may be required pursuant to this matter.
(18)
Item
4. Submission of Matters to a Vote of Security Holders.
Not
applicable.
Part
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
With
respect to “Market Information,” in the United States, GE common stock is listed
on the New York Stock Exchange (its principal market). GE common stock is also
listed on the London Stock Exchange and on Euronext Paris. Trading prices, as
reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and
dividend information follow:
|
Common
stock market price
|
Dividends
|
||||
|
(In
dollars)
|
High
|
Low
|
declared
|
||
|
2008
|
|||||
|
Fourth
quarter
|
$25.75
|
$12.58
|
$0.31
|
||
|
Third
quarter
|
30.39
|
22.16
|
0.31
|
||
|
Second
quarter
|
38.52
|
26.15
|
0.31
|
||
|
First
quarter
|
37.74
|
31.65
|
0.31
|
||
|
2007
|
|||||
|
Fourth
quarter
|
$42.15
|
$36.07
|
$0.31
|
||
|
Third
quarter
|
42.07
|
36.20
|
0.28
|
||
|
Second
quarter
|
39.77
|
34.55
|
0.28
|
||
|
First
quarter
|
38.28
|
33.90
|
0.28
|
||
As of
January 31, 2009, there were approximately 605,000 shareowner accounts of
record.
(19)
During
the fourth quarter of 2008, we purchased shares of our common stock as
follows.
|
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
programs(a)(c)(d)
|
Approximate
dollar
value
of shares that
may
yet be purchased
under
our share
repurchase program(d)
|
||||||||||||||
|
(Shares
in thousands)
|
||||||||||||||||||
|
2008
|
||||||||||||||||||
|
October
|
651
|
$20.45
|
567
|
|||||||||||||||
|
November
|
704
|
$16.96
|
509
|
|||||||||||||||
|
December
|
1,855
|
$16.59
|
527
|
|||||||||||||||
|
Total
|
3,210
|
$17.45
|
1,603
|
$
|
11.8
billion
|
|||||||||||||
|
(a)
|
Information
is presented on a fiscal calendar basis, consistent with our quarterly
financial reporting.
|
|
(b)
|
This
category includes 1,607 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 through 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, a stock purchase plan that is
available to the public. As major acquisitions or other circumstances
warrant, we modify the frequency and amount of share repurchases under the
Program.
|
|
(d)
|
Effective
September 25, 2008, we suspended our share repurchase program for
purchases other than for the GE Stock Direct
Plan.
|
For
information regarding compensation plans under which equity securities are
authorized for issuance, see Note 24 to the consolidated financial statements in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Five-year
financial performance graph: 2004-2008
Comparison
of five-year cumulative return among GE, S&P 500 and Dow Jones Industrial
Average
The
annual changes for the five-year period shown in the graph on this page are
based on the assumption that $100 had been invested in GE stock, the Standard
& Poor’s 500 Stock Index and the Dow Jones Industrial Average on December
31, 2003, and that all quarterly dividends were reinvested. The total cumulative
dollar returns shown on the graph represent the value that such investments
would have had on December 31, 2008.
|
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
|||||||||||||
|
GE
|
$
|
100
|
$
|
121
|
$
|
119
|
$
|
130
|
$
|
134
|
$
|
61
|
||||||
|
S&P
500
|
100
|
111
|
116
|
135
|
142
|
89
|
||||||||||||
|
DJIA
|
100
|
106
|
107
|
128
|
139
|
95
|
(20)
The
following table provides key information for Consolidated, GE and
GECS.
|
(Dollars
in millions; per-share amounts in dollars)
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||
|
|
|
|
|
||||||||||||
|
General
Electric Company and Consolidated Affiliates
|
|||||||||||||||
|
Revenues
|
$
|
182,515
|
$
|
172,488
|
$
|
151,568
|
$
|
136,262
|
$
|
123,814
|
|||||
|
Earnings
from continuing operations
|
18,089
|
22,457
|
19,344
|
17,279
|
15,591
|
||||||||||
|
Earnings
(loss) from discontinued operations, net of taxes
|
(679
|
)
|
(249
|
)
|
1,398
|
(559
|
)
|
1,631
|
|||||||
|
Net
earnings
|
17,410
|
22,208
|
20,742
|
16,720
|
17,222
|
||||||||||
|
Dividends
declared(a)
|
12,649
|
11,713
|
10,675
|
9,647
|
8,594
|
||||||||||
|
Return
on average shareowners’ equity(b)
|
15.9
|
%
|
20.4
|
%
|
19.8
|
%
|
18.1
|
%
|
18.8
|
%
|
|||||
|
Per
common share
|
|||||||||||||||
|
Earnings
from continuing operations – diluted
|
$
|
1.78
|
$
|
2.20
|
$
|
1.86
|
$
|
1.63
|
$
|
1.49
|
|||||
|
Earnings
(loss) from discontinued operations – diluted
|
(0.07
|
)
|
(0.02
|
)
|
0.13
|
(0.05
|
)
|
0.16
|
|||||||
|
Net
earnings – diluted
|
1.72
|
2.17
|
2.00
|
1.57
|
1.65
|
||||||||||
|
Earnings
from continuing operations – basic
|
1.79
|
2.21
|
1.87
|
1.63
|
1.50
|
||||||||||
|
Earnings
(loss) from discontinued operations – basic
|
(0.07
|
)
|
(0.02
|
)
|
0.14
|
(0.05
|
)
|
0.16
|
|||||||
|
Net
earnings – basic
|
1.72
|
2.18
|
2.00
|
1.58
|
1.66
|
||||||||||
|
Dividends
declared
|
1.24
|
1.15
|
1.03
|
0.91
|
0.82
|
||||||||||
|
Stock
price range
|
38.52-12.58
|
42.15-33.90
|
38.49-32.06
|
37.34-32.67
|
37.75-28.88
|
||||||||||
|
Year-end
closing stock price
|
16.20
|
37.07
|
37.21
|
35.05
|
36.50
|
||||||||||
|
Cash
and equivalents
|
48,187
|
15,731
|
14,086
|
8,608
|
11,833
|
||||||||||
|
Total
assets of continuing operations
|
796,046
|
786,794
|
674,966
|
588,821
|
578,560
|
||||||||||
|
Total
assets
|
797,769
|
795,683
|
697,273
|
673,210
|
750,252
|
||||||||||
|
Long-term
borrowings
|
330,067
|
319,013
|
260,749
|
212,167
|
207,784
|
||||||||||
|
Common
shares outstanding – average (in thousands)
|
10,079,923
|
10,182,083
|
10,359,320
|
10,569,805
|
10,399,629
|
||||||||||
|
Common
shareowner accounts – average
|
604,000
|
608,000
|
624,000
|
634,000
|
658,000
|
||||||||||
|
Employees
at year end
|
|||||||||||||||
|
United
States
|
152,000
|
155,000
|
155,000
|
161,000
|
165,000
|
||||||||||
|
Other
countries
|
171,000
|
172,000
|
164,000
|
155,000
|
142,000
|
||||||||||
|
Total
employees
|
323,000
|
327,000
|
319,000
|
316,000
|
307,000
|
(c)
|
|||||||||
|
GE
data
|
|||||||||||||||
|
Short-term
borrowings
|
$
|
2,375
|
$
|
4,106
|
$
|
2,076
|
$
|
972
|
$
|
3,252
|
|||||
|
Long-term
borrowings
|
9,827
|
11,656
|
9,043
|
8,986
|
7,561
|
||||||||||
|
Minority
interest
|
6,678
|
6,503
|
5,544
|
5,308
|
7,236
|
||||||||||
|
Shareowners’
equity
|
104,665
|
115,559
|
111,509
|
108,633
|
110,181
|
||||||||||
|
Total
capital invested
|
$
|
123,545
|
$
|
137,824
|
$
|
128,172
|
$
|
123,899
|
$
|
128,230
|
|||||
|
Return
on average total capital invested(b)
|
14.8
|
%
|
18.9
|
%
|
18.5
|
%
|
16.7
|
%
|
16.9
|
%
|
|||||
|
Borrowings
as a percentage of total capital invested(b)
|
9.9
|
%
|
11.4
|
%
|
8.7
|
%
|
8.0
|
%
|
9.0
|
%
|
|||||
|
Working
capital(b)
|
$
|
3,904
|
$
|
6,433
|
$
|
7,527
|
$
|
7,853
|
$
|
7,788
|
|||||
|
GECS
data
|
|||||||||||||||
|
Revenues
|
$
|
71,287
|
$
|
71,936
|
$
|
61,351
|
$
|
54,889
|
$
|
50,320
|
|||||
|
Earnings
from continuing operations
|
7,774
|
12,417
|
10,219
|
8,929
|
7,614
|
||||||||||
|
Earnings
(loss) from discontinued operations, net of taxes
|
(719
|
)
|
(2,116
|
)
|
439
|
(1,352
|
)
|
1,114
|
|||||||
|
Net
earnings
|
7,055
|
10,301
|
10,658
|
7,577
|
8,728
|
||||||||||
|
Shareowner’s
equity
|
53,279
|
57,676
|
54,097
|
50,812
|
54,379
|
||||||||||
|
Total
borrowings
|
514,601
|
500,922
|
426,262
|
362,042
|
355,463
|
||||||||||
|
Ratio
of debt to equity at GE Capital
|
8.76:1
|
(d)
|
8.10:1
|
7.52:1
|
7.09:1
|
6.45:1
|
|||||||||
|
Total
assets
|
$
|
660,902
|
$
|
646,485
|
$
|
565,258
|
$
|
540,584
|
$
|
618,614
|
|||||
|
Transactions
between GE and GECS have been eliminated from the consolidated
information.
|
|
|
(a)
|
Includes
$75 million of preferred stock dividends in 2008.
|
|
(b)
|
Indicates
terms are defined in the Glossary.
|
|
(c)
|
Includes
employees of Genworth, which was subsequently deconsolidated in
2005.
|
|
(d)
|
7.07:1
net of cash and equivalents and with classification of hybrid debt as
equity.
|
(21)
Operations
Our
consolidated financial statements combine the industrial manufacturing, services
and media businesses of General Electric Company (GE) with 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 the Supplemental Information section.
We
present Management’s Discussion of Operations in five parts: Overview of Our
Earnings from 2006 through 2008, Global Risk Management, Segment Operations,
Geographic Operations and Environmental Matters. Unless otherwise indicated, we
refer to captions such as revenues and earnings from continuing operations
simply as “revenues” and “earnings” throughout this Management’s Discussion and
Analysis. Similarly, discussion of other matters in our consolidated financial
statements relates to continuing operations unless otherwise
indicated.
Overview
of Our Earnings from 2006 through 2008
Our
results for the last three years reflect our strategy to strengthen our position
as a worldwide growth company operating in diverse industries in which we
maintain strong market-leader positions. During 2008, we encountered
unprecedented conditions in the world economy and financial markets that
affected all of our businesses. Over the three-year period our consolidated
revenues grew 20% on organic growth that averaged 6% per year, yet earnings
declined 6%. Our financial services businesses were most significantly affected
as earnings fell 24% on a 16% increase in revenues over this three-year
period.
The
information that follows will show how our global diversification and risk
management strategies have helped us to grow revenues and industrial earnings to
record levels and to outperform our peers in financial services businesses. We
also believe that the disposition of our less strategic businesses, our
restructuring actions and our investment in businesses with strong growth
potential have positioned us well for the future.
Energy
Infrastructure (19% and 18% of consolidated three-year revenues and total
segment profit, respectively) was well positioned to grow significantly over the
last several years as the worldwide demand for energy, and for alternative
sources of power, such as wind and thermal, rose to new levels. This resulted in
a 53% increase in revenues and a 73% increase in segment profit over the
three-year period. We continued to invest in market-leading technology and
services at Energy, Oil & Gas and Water.
Technology
Infrastructure (25% and 29% of consolidated three-year revenues and total
segment profit, respectively) grew revenues 23% and earnings 12% over the
three-year period as we continued to invest in market-leading technologies and
services at Aviation and Transportation and strategic acquisitions at
Healthcare. Aviation continued to grow revenues and earnings to record levels as
one of the world’s leading providers of aircraft engines and services. The
Aviation orders backlog also continued to grow, positioning us well for the
future. Product services and sales of our Evolution Series locomotives
contributed to Transportation’s growth over the last three years and we have
invested heavily in expanding our global platform. Healthcare realized benefits
from the acquisition of IDX Systems Corporation in 2006, expanding the breadth
of our product and service offerings to the healthcare industry. Healthcare was
adversely affected by the effects of the Deficit Reduction Act on U.S. equipment
sales. In addition, lower sales of surgical imaging equipment resulted from a
regulatory suspension on shipments at one of our facilities. We began shipping
some of these products in the first half of 2008. Enterprise Solutions offers
protection and productivity solutions such as safe facilities, plant automation,
power control and sensing applications.
NBC
Universal (10% and 11% of consolidated three-year revenues and total segment
profit, respectively) is a diversified media and entertainment company that has
grown through business and geographic diversity. While the television business
continues to be challenged by the effects of a difficult economy, our cable
business continues to grow and become more profitable. Our film business also
continues to perform well, with consistent contributions to
earnings.
(22)
Capital
Finance (37% and 39% of consolidated three-year revenues and total segment
profit, respectively) is a strong, focused business with leading positions in
several mid-market, corporate and consumer financing segments. Our performance
has been strong over the long-term, with solid risk management and underwriting
through various credit cycles. More recently, we have been affected by economic
changes, specifically the disruptions in capital markets, challenging credit
market environment and rising unemployment. Our earnings in 2008 and 2007 were
$8.6 billion and $12.2 billion, respectively. We expect the current challenging
credit and economic environment to continue to affect our earnings in 2009.
Throughout 2008, we tightened underwriting standards, shifted teams from
origination to collection and maintained a proactive risk management focus. Our
focus is to manage through the current challenging credit environment and
reposition GE Capital as a diversely funded and smaller finance
company.
Consumer
& Industrial (7% and 3% of consolidated three-year revenues and total
segment profit, respectively) is particularly sensitive to changes in economic
conditions. Reflective of the downturn in the U.S. housing market, Consumer
& Industrial revenues have declined over the three-year period. In response
to these tough economic conditions, in 2007, Consumer & Industrial began a
restructuring plan focused on reducing manufacturing capacity and transferring
work to lower-cost countries. Despite these cost reduction efforts, segment
profit declined on higher material and other costs.
Overall,
acquisitions contributed $7.4 billion, $7.7 billion and $3.9 billion to
consolidated revenues in 2008, 2007 and 2006, respectively. Our consolidated
earnings included approximately $0.8 billion in 2008, and $0.5 billion in both
2007 and 2006, 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 ongoing results through higher
revenues of $0.1 billion in 2008 and lower revenues of $3.6 billion and $1.3
billion in 2007 and 2006, respectively. This resulted in higher earnings of $0.4
billion in both 2008 and 2007, and $0.1 billion in 2006.
Significant
matters relating to our Statement of Earnings are explained below.
Discontinued
Operations. In September 2007, we committed to a plan to sell our
Japanese personal loan business (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 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. In December 2007, we completed the exit of WMC as a
result of continued pressures in the U.S. subprime mortgage industry. Both of
these businesses were previously reported in the Capital Finance
segment.
In
August 2007, we completed the sale of our Plastics business. We sold this
business because of its cyclicality, rising costs of natural gas and raw
materials, and the decision to redeploy capital resources into higher-growth
businesses. During 2006, we sold our Advanced Materials business.
In 2006,
we substantially completed our planned exit of the insurance businesses through
the sale of the property and casualty insurance and reinsurance businesses and
the European life and health operations of GE Insurance Solutions Corporation
(GE Insurance Solutions) and the sale of GE Life, our U.K.-based life insurance
operation, to Swiss Reinsurance Company (Swiss Re), and the sale, through a
secondary public offering, of our remaining 18% investment in Genworth
Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted
most of our consumer insurance business, including life and mortgage insurance
operations.
We
reported the businesses described above as discontinued operations for all
periods presented. For further information about discontinued operations, see
Note 2 to the consolidated financial statements in Part II, Item 8. “Financial
Statements and Supplementary Data” of this Form 10-K Report.
We declared $12.6 billion in
dividends in 2008. Common per-share dividends of $1.24 were up 8% from
2007, following a 12% increase from the preceding year. On February 6, 2009, our
Board of Directors approved a regular quarterly dividend of $0.31 per share of
common stock, which is payable April 27, 2009, to shareowners of record at close
of business on February 23, 2009. This payment will complete the dividend for
the first half of 2009. The Board will continue to evaluate the Company’s
dividend level for the second half of 2009 in light of the growing uncertainty
in the economy, including U.S. government actions, rising unemployment and the
recent announcements by the rating agencies. In 2008, we declared $0.1 billion
in preferred stock dividends.
(23)
Except
as otherwise noted, the analysis in the remainder of this section presents the
results of GE (with GECS included on a one-line basis) and GECS. See the Segment
Operations section for a more detailed discussion of the businesses within GE
and GECS.
GE sales of product services
were $35.5 billion in 2008, a 10% increase from 2007. Increases in product
services in 2008 and 2007 were led by growth at Energy Infrastructure and
Technology Infrastructure. Operating profit from product services was $9.3
billion in 2008, up 3% from 2007.
Postretirement benefit plans
costs were $2.2 billion, $2.6 billion and $2.3 billion in 2008, 2007 and 2006,
respectively. The cost decreased in 2008 primarily because of the effects of
prior years’ investment gains, higher discount rates and benefits from new
healthcare supplier contracts, partially offset by additional costs of plan
benefits resulting from union negotiations and a pensioner increase in 2007. The
cost increased in 2007 primarily because of plan benefit changes resulting from
new U.S. labor agreements and increases in retiree medical and drug costs,
partially offset by increases in discount rates for the year and effects of
recent investment gains. The cost increased in 2006 primarily because of the
effects of prior-years’ investment losses and lower discount rates.
Considering
the current and expected asset allocations, as well as historical and expected
returns on various categories of assets in which our plans are invested, we have
assumed that long-term returns on our principal pension plan assets will be 8.5%
for cost recognition in 2009, the same level as we assumed in 2008, 2007 and
2006. GAAP provides recognition of differences between assumed and actual
returns over a period no longer than the average future service of
employees.
We
expect the costs of our postretirement benefits in 2009 to be about the same as
the 2008 costs. The effects of decreasing discount rates (principal pension
plans’ discount rate decreasing from 6.34% to 6.11%) will be largely offset by
prior-years’ investment gains and benefits from new healthcare supplier
contracts. Assuming our 2009 actual experience is consistent with our current
benefit assumptions (e.g., expected return on assets, discount rates and
healthcare trend rates), we expect that costs of our postretirement benefits
will increase by approximately $1.0 billion in 2010 as compared to 2009,
primarily due to amortization of our unamortized losses relating to our
principal pension plans.
Our
principal pension plans were underfunded by $4.4 billion at the end of 2008 as
compared to overfunded by $16.8 billion at December 31, 2007. At December 31,
2008, the GE Pension Plan was underfunded by $0.9 billion and the GE
Supplementary Pension Plan, which is an unfunded plan, had a projected benefit
obligation of $3.5 billion. The reduction in surplus from year-end 2007 was
primarily attributable to asset investment performance resulting from the
deteriorating market conditions and economic environment in 2008. Our principal
pension plans’ assets decreased from $59.7 billion at the end of 2007 to $40.7
billion at December 31, 2008, a 28.2% decline in investment values during the
year. Assets of the GE Pension Plan are held in trust, solely for the benefit of
Plan participants, and are not available for general Company operations.
Although the reduction in pension plan assets in 2008 will impact future pension
plan costs, the Company’s requirement to make future cash contributions to the
Trust will depend on future market and economic conditions.
On an
Employee Retirement Income Security Act (ERISA) basis, the GE Pension Plan
remains fully funded at January 1, 2009. We will not make any contributions to
the GE Pension Plan in 2009. Assuming our 2009 actual experience is consistent
with our current benefit assumptions (e.g., expected return on assets and
interest rates), we will not be required to make contributions to the GE Pension
Plan in 2010.
At
December 31, 2008, the fair value of assets for our other pension plans was
$2.4 billion less than the respective projected benefit obligations. The
comparable amount at December 31, 2007 was $1.6 billion. We expect to contribute
$0.7 billion to our other pension plans in 2009, compared with actual
contributions of $0.6 billion and $0.7 billion in 2008 and 2007, respectively.
Our principal retiree health and life plans obligations exceeded the fair value
of related assets by $10.8 billion and $11.2 billion at December 31, 2008
and 2007, respectively. We fund our retiree health benefits on a pay-as-you-go
basis. We expect to contribute $0.7 billion to these plans in 2009 compared with
actual contributions of $0.6 billion in 2008 and 2007.
The
funded status of our postretirement benefits plans and future effects on
operating results depend on economic conditions and investment performance. See
Note 6 to the consolidated financial statements in Part II, Item 8. “Financial
Statements and Supplementary Data” of this Form 10-K Report for additional
information about funded status, components of earnings effects and actuarial
assumptions.
GE other costs and expenses
are selling, general and administrative expenses. These costs were 12.9%, 14.2%
and 14.3% of total GE sales in 2008, 2007 and 2006, respectively.
(24)
Interest on borrowings and other
financial charges amounted to $26.2 billion, $23.8 billion and $18.9
billion in 2008, 2007 and 2006, respectively. Substantially all of our
borrowings are in financial services, where interest expense was $25.1 billion,
$22.7 billion and $17.8 billion in 2008, 2007 and 2006, respectively. Average
borrowings increased over the three-year period. Interest rates increased from
2006 to 2007 attributable to rising credit spreads. Interest rates have
decreased from 2007 to 2008 in line with general market conditions. GECS average
borrowings were $521.2 billion, $456.4 billion and $389.0 billion in 2008, 2007
and 2006, respectively. GECS average composite effective interest rate was 4.8%
in 2008, 5.0% in 2007 and 4.6% in 2006. In 2008, GECS average assets of $667.2
billion were 13% higher than in 2007, which in turn were 17% higher than in
2006. We anticipate that our composite rates will continue to decline through
2009 as a result of decreased benchmark rates globally. However, these decreases
in benchmark rates will be partially offset by higher credit spreads and fees
associated with government guarantees and higher cash balances resulting from
pre-funding of debt maturities and the need to maintain greater liquidity in the
current environment. See the Liquidity and Borrowings section for a discussion
of liquidity, borrowings and interest rate risk management.
Income taxes are a significant
cost. As a global commercial enterprise, our tax rates are affected by many
factors, including our global mix of earnings, the extent to which those global
earnings are indefinitely reinvested outside the United States, legislation,
acquisitions, dispositions and tax characteristics of our income. Our tax
returns are routinely audited and settlements of issues raised in these audits
sometimes affect our tax provisions.
Income
taxes on consolidated earnings from continuing operations were 5.5% in 2008
compared with 15.6% in 2007 and 16.9% in 2006. Our consolidated income tax rate
decreased from 2007 to 2008 primarily because of a reduction during 2008 of
income in higher-taxed jurisdictions. This increased the relative effect of tax
benefits from lower-taxed global operations on the tax rate. In addition,
earnings from lower-taxed global operations increased from 2007 to 2008. The
increase in the benefit from lower-taxed global operations includes a benefit
from the 2008 decision to indefinitely reinvest, outside the U.S., prior-year
earnings because the use of foreign tax credits no longer required the
repatriation of those prior-year earnings.
Our
consolidated income tax rate decreased from 2006 to 2007 as the tax benefit on
the disposition of our investment in SES and an increase in favorable
settlements with tax authorities more than offset a decrease in the benefit from
lower-taxed earnings from global operations, which in 2006 included one-time tax
benefits from planning to use non-U.S. tax net operating losses.
A more
detailed analysis of differences between the U.S. federal statutory rate and the
consolidated rate, as well as other information about our income tax provisions,
is provided in Note 7 to the consolidated financial statements in Part II, Item
8. “Financial Statements and Supplementary Data” of this Form 10-K Report. The
nature of business activities and associated income taxes differ for GE and for
GECS and a separate analysis of each is presented in the paragraphs that
follow.
Because
GE tax expense does not include taxes on GECS earnings, the GE effective tax
rate is best analyzed in relation to GE earnings excluding GECS. GE pre-tax
earnings from continuing operations, excluding GECS earnings from continuing
operations, were $13.7 billion, $12.8 billion and $11.7 billion for 2008, 2007
and 2006, respectively. On this basis, GE’s effective tax rate was 24.9% in
2008, 21.8% in 2007 and 21.9% in 2006.
Resolution
of audit matters reduced the GE effective tax rate throughout this period. The
effects of such resolutions are included in the following captions in Note 7 to
the consolidated financial statements in Part II, Item 8. “Financial Statements
and Supplementary Data” of this Form 10-K Report.
|
Audit
resolutions –
effect
on GE excluding GECS tax rate
|
|||||||||
|
2008
|
2007
|
2006
|
|||||||
|
Tax
on global activities including exports
|
–
|
%
|
(2.7
|
)%
|
(0.8
|
)%
|
|||
|
All
other – net
|
(0.6
|
)
|
(2.4
|
)
|
(0.8
|
)
|
|||
|
(0.6
|
)%
|
(5.1
|
)%
|
(1.6
|
)%
|
||||
The GE
effective tax rate increased from 2007 to 2008 because of the 4.5 percentage
point lower 2008 benefit from favorable audit resolutions, partially offset by a
1.0 percentage point increase in the benefit in lower-taxed earnings from global
operations, excluding audit resolutions.
(25)
The GE
effective tax rate declined slightly from 2006 to 2007 because the 3.5
percentage point higher 2007 benefit from favorable audit resolutions was
largely offset by a 3.3 percentage point decrease in the benefit in lower-taxed
earnings from global operations, excluding audit resolutions and the effect of
tax law changes. The 2006 benefit from global operations included tax benefits
from planning to use non-U.S. net operating losses against profitable
operations.
The 2006
GE rate reflects the favorable audit resolutions shown above and the benefit of
lower-taxed earnings from global operations including tax benefits from planning
to use non-U.S. net operating losses against profitable operations.
The GECS
effective tax rate was (44.0)% in 2008, compared with 9.9% in 2007 and 12.0% in
2006. GE and GECS file a consolidated U.S. federal income tax return that
enables GE to use GECS tax deductions and credits to reduce the tax that
otherwise would have been payable by GE. The GECS effective tax rate for each
period reflects the benefit of these tax reductions. GE makes cash payments to
GECS for these tax reductions at the time GE’s tax payments are
due.
The GECS
rate decreased from 2007 to 2008 primarily because of a reduction during 2008 of
income in higher-taxed jurisdictions. This increased the relative effect of tax
benefits from lower-taxed global operations on the tax rate, reducing the rate
32.7 percentage points. In addition, earnings from lower-taxed global operations
increased from 2007 to 2008, causing an additional 20.7 percentage point rate
reduction. The increase in the benefit from lower-taxed global operations
includes 6.5 percentage points from the 2008 decision to indefinitely reinvest,
outside the U.S., prior-year earnings because the use of foreign tax credits no
longer required the repatriation of those prior-year earnings.
The GECS
income tax rate decreased from 2006 to 2007 as the tax benefit on the
disposition of its investment in SES and growth in lower-taxed global earnings,
which decreased the GECS effective tax rate 4.0 and 1.0 percentage points,
respectively, were partially offset by higher net tax expense related to U.S.
and non-U.S. audit activity and from the absence of the 2006 benefit of the
reorganization, discussed below, of our aircraft leasing business, which
increased the rate 1.6 and 1.1 percentage points, respectively.
As a
result of the repeal of the extraterritorial income (ETI) taxing regime as part
of the American Jobs Creation Act of 2004 (the Act), our aircraft leasing
business no longer qualifies for a reduced U.S. tax rate. However, the Act also
extended to aircraft leasing the U.S. tax deferral benefits that were already
available to other GE non-U.S. active operations. These legislative changes,
coupled with a reorganization of our aircraft leasing business and a favorable
Irish ruling, decreased the GECS effective tax rate 1.1 percentage points in
2006.
Global
Risk Management
A
disciplined approach to risk is important in a diversified organization such as
ours in order to ensure that we are executing according to our strategic
objectives and that we only accept risk for which we are adequately compensated.
It is necessary for us to manage risk at the individual transaction level, and
to consider aggregate risk at the customer, industry, geographic and
collateral-type levels, where appropriate.
The GE
Board of Directors maintains overall responsibility for risk oversight, with a
focus on the most significant risks facing GE. The Board's Audit Committee
oversees GE’s risk policies and processes relating to the financial statements
and financial reporting process. The Board's Public Responsibilities Committee
oversees risks involved in GE’s public policy initiatives, the environment and
similar matters. The Board’s Management Development and Compensation Committee
oversees risk related to compensation.
(26)
The
Board’s oversight process builds upon our management’s risk management and
assessment processes, which include long-term strategic planning, executive
development and evaluation, regulatory and litigation compliance reviews,
environmental compliance reviews, GECS Corporate Risk Function and the Corporate
Risk Committee. Each year, management and the Board jointly develop a list of
major risks that GE plans to address. Throughout the year, either the Board or
one of its committees dedicates a portion of their meetings to review and
discuss these risk topics in greater detail. Strategic and operational risks are
covered in the CEO’s report on operations to the Board at regularly scheduled
Board meetings. At least twice a year, the Audit Committee receives a risk
update from the GECS risk officer, which focuses on GECS risk strategy and its
financial services portfolio, including its processes for managing credit and
market risk within its portfolio. In addition, each year, and in some years more
frequently, the Audit Committee receives a comprehensive report from GE’s
Treasurer on GECS capital markets exposure and its liquidity and funding risks
and a comprehensive report from GE’s General Counsel covering compliance issues.
Each year, the Committee also reviews and discusses topics related to the
financial reporting process, including an update on information technology,
controllership, insurance, tax strategies and policies, accounting and numerous
reports on regulation, compliance, litigation and investigations affecting GE
businesses.
The GECS
Board of Directors oversees the risk management process, and approves all
significant acquisitions and dispositions as well as significant borrowings and
investments. All participants in the risk management process must comply with
approval limits established by the GECS Board.
The GECS
Chief Risk Officer is responsible, with the Corporate Risk Function, for
establishing standards for the measurement, reporting and limiting of risk; for
managing and evaluating risk managers; for approving risk management policies;
and for reviewing major risk exposures and concentrations across the
organization. The GECS Corporate Risk Function analyzes certain business risks
and assesses them in relation to aggregate risk appetite and approval limits set
by the GECS Board of Directors.
Threshold
responsibility for identifying, quantifying and mitigating risks is assigned to
our individual businesses. We employ proprietary analytic models to allocate
capital to our financing activities, to identify the primary sources of risk and
to measure the amount of risk we will take for each product line. This approach
allows us to develop early signals that monitor changes in risk affecting
portfolio performance and actively manage the portfolio. Other corporate
functions such as Controllership, Financial Planning and Analysis, Treasury,
Legal and our Corporate Audit Staff support business-level risk management.
Businesses that, for example, hedge financial risk with derivative financial
instruments must do so using our centrally managed Treasury function, providing
assurance that the business strategy complies with our corporate policies and
achieves economies of scale. We review risks periodically with business-level
risk managers, senior management and our Board of Directors.
Dedicated
risk professionals across the businesses include underwriters, portfolio
managers, collectors, environmental and engineering specialists, and specialized
asset managers who evaluate leased asset residuals and remarket off-lease
equipment. The senior risk officers have, on average, over 25 years of
experience.
We
manage a variety of risks including liquidity, credit, market and government and
regulatory risks.
|
·
|
Liquidity
risk is the risk of being unable to accommodate liability maturities, fund
asset growth and meet contractual obligations through access to funding at
reasonable market rates. Additional information about our liquidity and
how we manage this risk can be found in the Financial Resources and
Liquidity section of this Item and in Notes 18 and 29 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K
Report.
|
|
·
|
Credit
risk is the risk of financial loss arising from a customer or counterparty
failure to meet its contractual obligations. We face credit risk in our
investing, lending and leasing activities and derivative financial
instruments activities (see the Financial Resources and Liquidity and
Critical Accounting Estimates sections of this Item and Notes 1, 9, 12,
13, 29 and 31 to the consolidated financial statements in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K
Report).
|
|
·
|
Market
risk is the potential loss in value of investment and other asset and
liability portfolios, including financial instruments and residual values
of leased assets. This risk is caused by changes in market variables, such
as interest and currency exchange rates and equity and commodity prices.
We are exposed to market risk in the normal course of our business
operations as a result of our ongoing investing and funding activities.
Additional information can be found in the Financial Resources and
Liquidity section of this Item and in Notes 6, 9, 12, 14, 28 and 29 to the
consolidated financial statements in Part II, Item 8. “Financial
Statements and Supplementary Data” of this Form 10-K
Report.
|
(27)
|
·
|
Government
and regulatory risk is the risk that the government or regulatory
authorities will implement new laws or rules, amend existing laws or
rules, or interpret or enforce them in ways that would cause us to have to
change our business models or practices. We manage these risks through the
GECS Board, our Policy Compliance Review Board and our Corporate Risk
Committee.
|
Other
risks include natural disasters, availability of necessary materials, guarantees
of product performance and business interruption. These types of risks are often
insurable, and success in managing these risks is ultimately determined by the
balance between the level of risk retained or assumed and the cost of
transferring risk to others.
Our risk
management approach has the following major tenets: a broad spread of risk based
on managed exposure limits; senior, secured commercial financings; and a hold to
maturity model with transactions underwritten to our “on-book”
standards.
The GECC
financing portfolios comprise approximately 70% commercial and 30% consumer risk
activities, with 53% of the portfolio outside the U.S. Exposure to developing
markets is 11% of the portfolio and is primarily through our Eastern European
banking operations and Mexican commercial financing activities - where we have
operated for over 10 years - and various minority owned joint
ventures.
The
commercial portfolio has a maximum single industry concentration of 6%,
excluding the commercial aircraft financing and the commercial real estate
businesses, which are diversified separately within their respective portfolios.
67% of all commercial exposures are less than $100 million to any one customer,
while 55% are less than $50 million. Our commercial aircraft financing business
owns 1,494 aircraft – 56% are narrow body planes and predominantly newer,
high-demand models, while only 15% are smaller regional jets and older Boeing
737 classic aircraft. The average age of the fleet is 7 years and our customers
include over 230 airlines located in 70 countries. Leased collateral represents
asset types we have over 20 years experience managing.
The
commercial real estate business consists of a real estate investment portfolio,
a real estate lending portfolio, and a single tenant financing portfolio. The
real estate investment and lending portfolios are global and consist of
approximately 8,000 individual properties in 2,600 cities in 31 countries with
an average property investment of under $10 million.
|
·
|
Our
real estate investment portfolio includes approximately 3,200 properties
located in 900 cities and 22 countries, with 71% of this portfolio outside
the U.S., primarily located in Europe, the U.K., Asia, Canada and Mexico,
across a wide variety of property types including office,
industrial/warehouse, and
multifamily.
|
|
·
|
Our
real estate lending portfolio is secured by approximately 4,800 properties
in 1,900 cities and 25 countries, with 44% of the assets securing this
portfolio located outside the U.S., across a wide variety of property
types including office, multifamily and
hotel.
|
|
·
|
The
single tenant financing portfolio has approximately 4,200 properties in
1,360 cities in the U.S. and Canada, and an average loan size under $3
million.
|
The U.S.
consumer portfolio includes private-label credit card and sales financing for
over 56 million consumers. The portfolio includes customers across the U.S. and
no metropolitan statistical area accounts for more than 4% of the portfolio. The
average credit line for the private label portfolio is $600. The non-U.S.
portfolio accounts for 80% of all consumer risk activities and includes consumer
mortgages, auto loans, personal loans and credit card financing in 43 countries.
Western Europe, the U.K., Eastern Europe and Australia/New Zealand are the
primary non-U.S. markets. Mortgages represent 43% of the total consumer
portfolio. The average loan-to-value (LTV) at origination of the total global
mortgage portfolio is approximately 74%. Western Europe, Australia and New
Zealand, Ireland and the U.K. account for approximately 80% of the mortgage
book. GE employees underwrite all mortgages and originate to hold all mortgages
on book. We exited the U.S. mortgage business in 2007.
The U.K.
mortgage business tightened underwriting criteria throughout 2008 and reduced
volume by 54% in response to the weakening home price environment in the U.K.
Since mid-2006, the first mortgage loans originated in the U.K. that were
greater than 80% LTV are covered by private mortgage insurance for the mortgage
balance in excess of 80%. Insured mortgages account for approximately 73% of the
portfolio above 80% LTV at origination.
The
Australia/New Zealand mortgages are generally prime credit, and 94% of the
portfolio is covered by private mortgage insurance for the full amount of the
mortgage, which is customary in this market.
(28)
The
French mortgage portfolio is generally prime credit, and 29% is insured for
mortgage loans greater than 80% LTV (for the mortgage balance in excess of
80%).
Our five
segments are focused on the broad markets they serve: Energy Infrastructure,
Technology Infrastructure, NBC Universal, Capital Finance and Consumer &
Industrial. In addition to providing information on segments in their entirety,
we have also provided supplemental information for certain businesses within the
segments for greater clarity.
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 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 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. For additional information about our segments, see Note 27 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
|
General
Electric Company and consolidated affiliates
|
|||||||||||||||
|
(In
millions)
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||
|
Revenues
|
|||||||||||||||
|
Energy
Infrastructure
|
$
|
38,571
|
$
|
30,698
|
$
|
25,221
|
$
|
21,921
|
$
|
19,841
|
|||||
|
Technology
Infrastructure
|
46,316
|
42,801
|
37,687
|
33,873
|
30,142
|
||||||||||
|
NBC
Universal
|
16,969
|
15,416
|
16,188
|
14,689
|
12,886
|
||||||||||
|
Capital
Finance
|
67,008
|
66,301
|
56,378
|
49,071
|
43,750
|
||||||||||
|
Consumer
& Industrial
|
11,737
|
12,663
|
13,202
|
13,040
|
12,408
|
||||||||||
|
Total
segment revenues
|
180,601
|
167,879
|
148,676
|
132,594
|
119,027
|
||||||||||
|
Corporate
items and eliminations
|
1,914
|
4,609
|
2,892
|
3,668
|
4,787
|
||||||||||
|
Consolidated
revenues
|
$
|
182,515
|
$
|
172,488
|
$
|
151,568
|
$
|
136,262
|
$
|
123,814
|
|||||
|
Segment
profit
|
|||||||||||||||
|
Energy
Infrastructure
|
$
|
6,080
|
$
|
4,817
|
$
|
3,518
|
$
|
3,222
|
$
|
3,100
|
|||||
|
Technology
Infrastructure
|
8,152
|
7,883
|
7,308
|
6,188
|
5,412
|
||||||||||
|
NBC
Universal
|
3,131
|
3,107
|
2,919
|
3,092
|
2,558
|
||||||||||
|
Capital
Finance
|
8,632
|
12,243
|
10,397
|
8,414
|
6,593
|
||||||||||
|
Consumer
& Industrial
|
365
|
1,034
|
970
|
732
|
601
|
||||||||||
|
Total
segment profit
|
26,360
|
29,084
|
25,112
|
21,648
|
18,264
|
||||||||||
|
Corporate
items and eliminations
|
(2,691
|
)
|
(1,840
|
)
|
(1,548
|
)
|
(372
|
)
|
165
|
||||||
|
GE
interest and other financial charges
|
(2,153
|
)
|
(1,993
|
)
|
(1,668
|
)
|
(1,319
|
)
|
(901
|
)
|
|||||
|
GE
provision for income taxes
|
(3,427
|
)
|
(2,794
|
)
|
(2,552
|
)
|
(2,678
|
)
|
(1,937
|
)
|
|||||
|
Earnings
from continuing operations
|
18,089
|
22,457
|
19,344
|
17,279
|
15,591
|
||||||||||
|
Earnings
(loss) from discontinued
|
|||||||||||||||
|
operations,
net of taxes
|
(679
|
)
|
(249
|
)
|
1,398
|
(559
|
)
|
1,631
|
|||||||
|
Consolidated net
earnings
|
$
|
17,410
|
$
|
22,208
|
$
|
20,742
|
$
|
16,720
|
$
|
17,222
|
|||||
|
See
accompanying notes to consolidated financial
statements.
|
(29)
Energy
Infrastructure
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
$
|
38,571
|
$
|
30,698
|
$
|
25,221
|
|||
|
Segment
profit
|
$
|
6,080
|
$
|
4,817
|
$
|
3,518
|
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
|||||||||
|
Energy
|
$
|
29,309
|
$
|
22,456
|
$
|
19,406
|
|||
|
Oil
& Gas
|
7,417
|
6,849
|
4,340
|
||||||
|
Segment
profit
|
|||||||||
|
Energy
|
$
|
4,880
|
$
|
3,835
|
$
|
2,918
|
|||
|
Oil
& Gas
|
1,127
|
860
|
548
|
Energy
Infrastructure revenues rose 26%, or $7.9 billion, in 2008 on higher volume
($6.0 billion), higher prices ($1.4 billion) and the effects of the weaker U.S.
dollar ($0.5 billion). The increase in volume reflected increased sales of
thermal and wind equipment at Energy, and the effects of acquisitions and
increased sales of services at Oil & Gas. The increase in price was
primarily at Energy, while the effects of the weaker U.S. dollar were primarily
at Energy and Oil & Gas.
Segment
profit rose 26% to $6.1 billion in 2008, compared with $4.8 billion in 2007, as
higher prices ($1.4 billion), higher volume ($1.0 billion) and the effects of
the weaker U.S. dollar ($0.1 billion) more than offset the effects of higher
material and other costs ($0.7 billion) and lower productivity ($0.5 billion).
Volume and material and other costs increased across all businesses of the
segment. The effects of productivity were primarily at Energy.
Energy
Infrastructure revenues rose 22%, or $5.5 billion, in 2007 on higher volume
($4.0 billion), higher prices ($0.8 billion) and the effects of the weaker U.S.
dollar ($0.7 billion). The increase in volume reflected increased sales of
thermal and wind equipment at Energy, and the effects of acquisitions and
increased sales of equipment and services at Oil & Gas. The increase in
price was primarily at Energy, while the effects of the weaker U.S. dollar were
primarily at Oil & Gas and Energy.
Segment
profit rose 37% to $4.8 billion in 2007, compared with $3.5 billion in 2006, as
higher prices ($0.8 billion), higher volume ($0.7 billion) and productivity
($0.1 billion) more than offset the effects of higher material and other costs
($0.4 billion). The increase in volume primarily related to Energy and Oil &
Gas.
(30)
Technology
Infrastructure
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
$
|
46,316
|
$
|
42,801
|
$
|
37,687
|
|||
|
Segment
profit
|
$
|
8,152
|
$
|
7,883
|
$
|
7,308
|
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
|||||||||
|
Aviation
|
$
|
19,239
|
$
|
16,819
|
$
|
13,017
|
|||
|
Enterprise
Solutions
|
4,710
|
4,462
|
3,951
|
||||||
|
Healthcare
|
17,392
|
16,997
|
16,560
|
||||||
|
Transportation
|
5,016
|
4,523
|
4,159
|
||||||
|
Segment
profit
|
|||||||||
|
Aviation
|
$
|
3,684
|
$
|
3,222
|
$
|
2,802
|
|||
|
Enterprise
Solutions
|
691
|
697
|
620
|
||||||
|
Healthcare
|
2,851
|
3,056
|
3,142
|
||||||
|
Transportation
|
962
|
936
|
774
|
Technology
Infrastructure revenues rose 8%, or $3.5 billion, in 2008 on higher volume ($3.0
billion), the effects of the weaker U.S. dollar ($0.3 billion) and higher prices
($0.2 billion). The increase in volume reflected the effects of acquisitions and
increased sales of military and commercial engines and services at Aviation;
increased sales in the international diagnostic imaging, clinical systems and
life sciences businesses of Healthcare; increased equipment sales at
Transportation; and increases at Sensing and Inspection Technologies and Digital
Energy at Enterprise Solutions. The effects of the weaker U.S. dollar were
primarily at Healthcare and Enterprise Solutions. Higher prices were primarily
at Aviation and Transportation, partially offset by lower prices at
Healthcare.
Segment
profit rose 3% to $8.2 billion in 2008, compared with $7.9 billion in 2007, as
the effects of productivity ($0.5 billion), higher volume ($0.4 billion) and
higher prices ($0.2 billion) more than offset the effects of higher material and
other costs ($0.9 billion). The effects of productivity were primarily at
Healthcare and Aviation. Volume increases were primarily at Aviation and
Transportation. The increase in material costs was primarily at Aviation and
Transportation, partially offset by a decrease at Healthcare. Labor and other
costs increased across all businesses of the segment.
Technology
Infrastructure revenues rose 14%, or $5.1 billion, in 2007 on higher volume
($4.6 billion) and the effects of the weaker U.S. dollar ($0.6 billion),
partially offset by lower prices ($0.1 billion). The increase in volume
reflected the effects of acquisitions and increased sales of commercial engines
and services at Aviation; increased sales in the international diagnostic
imaging, clinical systems and life sciences businesses of Healthcare; primarily
the effects of acquisitions at Enterprise Solutions; and increased sales of
equipment and services at Transportation. The effects of the weaker U.S. dollar
were primarily at Healthcare and Enterprise Solutions.
Segment
profit rose 8% to $7.9 billion in 2007, compared with $7.3 billion in 2006, as
higher volume ($0.8 billion), productivity ($0.4 billion) and higher sales of
minority interests in engine programs ($0.1 billion) more than offset the
effects of higher material and other costs ($0.7 billion) and lower prices ($0.1
billion). The increase in volume primarily related to Aviation, Healthcare and
Enterprise Solutions. The effects of productivity were primarily at Healthcare
and Transportation. The increase in material costs was primarily at Aviation,
partially offset by a decrease at Healthcare, and labor and other costs
increased across all businesses of the segment.
(31)
NBC Universal revenues
increased $1.6 billion, or 10%, to $17.0 billion in 2008, as revenues from the
Olympics broadcasts ($1.0 billion) and higher revenues in cable ($0.6 billion)
and film ($0.4 billion) were partially offset by lower earnings and impairments
related to associated companies and investment securities ($0.3 billion) and
lower revenues from our television business ($0.1 billion). Segment profit of
$3.1 billion in 2008 was flat compared with 2007, as higher earnings from cable
($0.3 billion) and proceeds from insurance claims ($0.4 billion) were offset by
lower earnings and impairments related to associated companies and investment
securities ($0.3 billion), losses from the Olympics broadcasts ($0.2 billion),
and lower earnings from our television business ($0.1 billion) and film ($0.1
billion).
NBC
Universal revenues declined 5%, or $0.8 billion, in 2007, primarily from the
lack of current-year counterparts to the 2006 Olympics broadcasts ($0.7 billion)
and 2006 sale of television stations ($0.2 billion), lower revenues in our
broadcast network and television stations as a result of lower advertising sales
($0.5 billion) and lower film revenues ($0.1 billion), partially offset by
higher revenues for cable ($0.4 billion) and television production and
distribution ($0.3 billion). Segment profit rose 6%, or $0.2 billion, in 2007 as
improvements in cable ($0.2 billion), television production and distribution
($0.2 billion), film ($0.1 billion) and the absence of Olympics broadcasts in
2007 ($0.1 billion) were partially offset by the lack of a current-year
counterpart to the 2006 sale of four television stations ($0.2 billion) and
lower earnings from our broadcast network and television stations ($0.2
billion). See Corporate Items and Eliminations for a discussion of items not
allocated to this segment.
Capital
Finance
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
$
|
67,008
|
$
|
66,301
|
$
|
56,378
|
|||
|
Segment
profit
|
$
|
8,632
|
$
|
12,243
|
$
|
10,397
|
|
December
31 (In millions)
|
2008
|
2007
|
|||||||
|
Total
assets
|
$
|
572,903
|
$
|
583,965
|
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
|||||||||
|
Commercial
Lending and Leasing (CLL)
|
$
|
26,742
|
$
|
27,267
|
$
|
25,833
|
|||
|
GE
Money
|
25,012
|
24,769
|
19,508
|
||||||
|
Real
Estate
|
6,646
|
7,021
|
5,020
|
||||||
|
Energy
Financial Services
|
3,707
|
2,405
|
1,664
|
||||||
|
GE
Commercial Aviation Services (GECAS)
|
4,901
|
4,839
|
4,353
|
||||||
|
Segment
profit
|
|||||||||
|
CLL
|
$
|
1,805
|
$
|
3,801
|
$
|
3,503
|
|||
|
GE
Money
|
3,664
|
4,269
|
3,231
|
||||||
|
Real
Estate
|
1,144
|
2,285
|
1,841
|
||||||
|
Energy
Financial Services
|
825
|
677
|
648
|
||||||
|
GECAS
|
1,194
|
1,211
|
1,174
|
|
December
31 (In millions)
|
2008
|
2007
|
|||||||
|
Total
assets
|
|||||||||
|
CLL
|
$
|
232,486
|
$
|
229,608
|
|||||
|
GE
Money
|
183,617
|
209,178
|
|||||||
|
Real
Estate
|
85,266
|
79,285
|
|||||||
|
Energy
Financial Services
|
22,079
|
18,705
|
|||||||
|
GECAS
|
49,455
|
47,189
|
(32)
Capital
Finance 2008 revenues increased by 1%, and net earnings decreased 29%, compared
with 2007. Revenues in 2008 and 2007 included $4.4 billion and $0.5 billion from
acquisitions, respectively, and in 2008 were benefited by $0.1 billion as a
result of dispositions. Revenues in 2008 also decreased $3.3 billion as a result
of organic revenue declines ($4.5 billion), partially offset by the weaker U.S.
dollar ($1.2 billion). Net earnings decreased by $3.6 billion in 2008, resulting
from core declines ($3.5 billion), including an increase of $1.9 billion in the
provision for losses on financing receivables, lower investment income ($0.6
billion) and lower securitization income ($0.4 billion), offset by acquisitions
($0.5 billion), the weaker U.S. dollar ($0.3 billion) and dispositions ($0.1
billion). Net earnings included mark-to-market losses and impairments ($1.4
billion), partially offset by increased tax benefits from lower-taxed earnings
from global operations ($0.7 billion) and Genpact mark-to-market gains ($0.2
billion).
Capital
Finance 2007 revenues and net earnings both increased 18%, compared with 2006.
Revenues in 2007 included $3.5 billion from acquisitions and were reduced by
$2.7 billion as a result of dispositions. Revenues in 2007 also increased $9.1
billion as a result of organic revenue growth ($6.8 billion) and the weaker U.S.
dollar ($2.3 billion). The increase in net earnings resulted primarily from core
growth ($1.0 billion), higher securitization income ($0.4 billion) and the
weaker U.S. dollar ($0.3 billion). Core growth included $0.5 billion
representing the total year’s tax benefit on the disposition of our investment
in SES, growth in lower-taxed earnings from global operations ($0.4 billion) and
the sale of part of our Garanti investment ($0.2 billion), partially offset by
declines in fair value of retained interests in securitizations ($0.2 billion).
See Corporate Items and Eliminations for a discussion of items not allocated to
this segment.
Additional
information about certain Capital Finance businesses follows.
CLL 2008
revenues decreased 2% and net earnings decreased 53% compared with 2007.
Revenues in 2008 and 2007 included $1.8 billion and $0.2 billion, respectively,
from acquisitions and in 2008 were reduced by $0.3 billion as a result of
dispositions. Revenues in 2008 decreased $1.9 billion compared with 2007 as a
result of organic revenue declines ($2.3 billion), partially offset by the
weaker U.S. dollar ($0.5 billion). Net earnings decreased by $2.0 billion in
2008, resulting from core declines ($2.2 billion), including an increase of $0.5
billion in the provision for losses on financing receivables and lower
investment income ($0.3 billion), partially offset by acquisitions ($0.4
billion) and the effect of the weaker U.S. dollar ($0.1 billion). Net earnings
included mark-to-market losses and impairments ($0.8 billion), the absence of
the effects of the 2007 tax benefit on the disposition of our investment in SES
($0.5 billion) and SES gains ($0.1 billion), partially offset by Genpact
mark-to-market gains ($0.2 billion).
CLL 2007
revenues and net earnings increased 6% and 9%, respectively, compared with 2006.
Revenues in 2007 and 2006 included $2.1 billion and $0.1 billion, respectively,
from acquisitions, and in 2007 were reduced by $2.7 billion as a result of
dispositions. Revenues in 2007 also increased $1.9 billion as a result of
organic revenue growth ($1.2 billion) and the weaker U.S. dollar ($0.7 billion).
The increase in net earnings resulted from acquisitions ($0.2 billion), core
growth ($0.1 billion) and the weaker U.S. dollar ($0.1 billion), partially
offset by dispositions ($0.1 billion). Core growth included $0.5 billion
representing the total year’s tax benefit on the disposition of our investment
in SES, partially offset by $0.2 billion of higher credit losses and $0.1
billion in charges related to mark-to-market adjustments to loans held-for-sale.
Investment income included higher SES gains ($0.1 billion), offset by
impairments of securitization retained interests ($0.1 billion).
GE Money
2008 revenues increased 1% and net earnings decreased 14% compared with 2007.
Revenues for 2008 included $0.7 billion from acquisitions and $0.4 billion from
the gain on sale of our Corporate Payment Services (CPS) business and were
reduced by $0.2 billion from dispositions. Revenues in 2008 also decreased $0.6
billion compared with 2007 as a result of organic revenue declines ($1.2
billion), partially offset by the weaker U.S. dollar ($0.6 billion). The
decrease in net earnings resulted primarily from core declines ($0.5 billion)
and lower securitization income ($0.5 billion). The decreases were partially
offset by the gain on the sale of our CPS business ($0.2 billion), the weaker
U.S. dollar ($0.1 billion) and acquisitions ($0.1 billion). Core declines
primarily resulted from lower results in the U.S., reflecting the effects of
higher delinquencies ($1.2 billion), partially offset by growth in lower-taxed
earnings from global operations ($1.0 billion), including the decision to
indefinitely reinvest, outside the U.S., prior-year earnings.
GE Money
2007 revenues and net earnings increased 27% and 32%, respectively, compared
with 2006. Revenues in 2007 included $0.4 billion from acquisitions. Revenues in
2007 also increased $4.8 billion as a result of organic revenue growth ($3.5
billion) and the weaker U.S. dollar ($1.4 billion). The increase in net earnings
resulted primarily from core growth ($0.3 billion), higher securitization income
($0.4 billion), the sale of part of our Garanti investment ($0.2 billion) and
the weaker U.S. dollar ($0.2 billion). Core growth included growth in
lower-taxed earnings from global operations ($0.3 billion), partially offset by
lower results in the U.S., reflecting the effects of higher delinquencies ($0.4
billion).
(33)
Real
Estate 2008 revenues decreased 5% and net earnings decreased 50% compared with
2007. Revenues for 2008 included $0.3 billion from acquisitions. Revenues in
2008 also decreased $0.7 billion compared with 2007 as a result of organic
revenue declines ($0.8 billion), partially offset by the weaker U.S. dollar
($0.2 billion). Real Estate net earnings decreased $1.1 billion compared with
2007, primarily from a decline in net earnings from real estate equity
investments ($1.2 billion), partially offset by an increase in net earnings from
real estate lending. Net earnings from the sale of real estate equity
investments in 2008 were lower as a result of increasingly difficult market
conditions. 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 a result of deterioration in current and expected real estate
market liquidity and macroeconomic trends, it is difficult to predict with
certainty the level of future sales or sales prices.
Real
Estate assets at December 31, 2008, increased $6.0 billion, or 8%, from December
31, 2007, including $12.1 billion, or 34%, attributable to an increase in real
estate lending, partially offset by a $6.4 billion, or 16%, decline in real
estate equity investments. During 2008, we sold real estate equity investment
assets with a book value totaling $5.8 billion, which resulted in net earnings
of $1.3 billion that were partially offset by losses, impairments and
depreciation.
Real
Estate 2007 revenues and net earnings increased 40% and 24%, respectively,
compared with 2006. Revenues in 2007 included $0.3 billion from acquisitions.
Revenues in 2007 also increased $1.8 billion as a result of organic revenue
growth ($1.5 billion) and the weaker U.S. dollar ($0.2 billion). Real Estate net
earnings increased 24% compared with 2006, primarily as a result of a $0.5
billion increase in net earnings from sales of real estate
investments.
Real
Estate assets at December 31, 2007, increased $25.5 billion, or 47%, from
December 31, 2006, of which $12.6 billion was real estate investments, also up
47%. During 2007, we sold real estate assets with a book value totaling $7.0
billion, which resulted in net earnings of $2.1 billion.
Energy
Financial Services 2008 revenues and net earnings increased 54% and 22%,
respectively, compared with 2007. Revenues in 2008 and 2007 included $1.6
billion and $0.3 billion, respectively, from acquisitions. The increase in net
earnings resulted primarily from core growth ($0.2 billion), partially offset by
lower investment income ($0.1 billion).
Energy
Financial Services 2007 revenues and net earnings increased 45% and 4%,
respectively, compared with 2006. The increase in revenues resulted primarily
from acquisitions ($0.6 billion) and organic revenue growth ($0.1 billion). The
increase in net earnings resulted primarily from core growth.
GECAS
2008 revenues increased 1% and net earnings decreased 1% compared with 2007. The
increase in revenues is primarily a result of organic revenue growth ($0.1
billion), partially offset by lower investment income. The decrease in net
earnings resulted primarily from lower investment income, partially offset by
core growth.
GECAS
2007 revenues and net earnings increased 11% and 3%, respectively, compared with
2006. The increase in revenues resulted primarily from organic revenue growth
($0.4 billion) and acquisitions ($0.1 billion). The increase in net earnings
resulted primarily from core growth.
Consumer & Industrial
revenues decreased 7%, or $0.9 billion, to $11.7 billion in 2008 compared with
2007 as lower volume ($1.2 billion) was partially offset by higher prices ($0.2
billion) and the effects of the weaker U.S. dollar ($0.1 billion). The decrease
in volume reflected tightened spending in the U.S. market. Segment profit
decreased 65%, or $0.7 billion, to $0.4 billion as higher material and other
costs ($0.4 billion), lower volume ($0.2 billion), lower productivity ($0.1
billion) and the effects of the weaker U.S. dollar on manufacturing costs ($0.1
billion) were partially offset by higher prices ($0.2 billion).
Consumer
& Industrial revenues decreased 4%, or $0.5 billion, in 2007 compared with
2006 as lower volume ($0.8 billion) was partially offset by the effects of the
weaker U.S. dollar ($0.2 billion) and higher prices ($0.1 billion). The decrease
in volume reflects the sale of GE Supply in the third quarter of 2006. Segment
profit rose 7%, or $0.1 billion, as productivity ($0.3 billion) and higher
prices ($0.1 billion) were partially offset by higher material and other costs
($0.4 billion). See Corporate Items and Eliminations for a discussion of items
not allocated to this segment.
(34)
Corporate
Items and Eliminations
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
|||||||||
|
Insurance
activities
|
$
|
3,335
|
$
|
3,962
|
$
|
3,692
|
|||
|
Eliminations
and other
|
(1,421
|
)
|
647
|
(800
|
)
|
||||
|
Total
|
$
|
1,914
|
$
|
4,609
|
$
|
2,892
|
|||
|
Operating
profit (cost)
|
|||||||||
|
Insurance
activities
|
$
|
(202
|
)
|
$
|
145
|
$
|
57
|
||
|
Principal
pension plans
|
(244
|
)
|
(755
|
)
|
(877
|
)
|
|||
|
Underabsorbed
corporate overhead
|
(341
|
)
|
(437
|
)
|
(266
|
)
|
|||
|
Other
|
(1,904
|
)
|
(793
|
)
|
(462
|
)
|
|||
|
Total
|
$
|
(2,691
|
)
|
$
|
(1,840
|
)
|
$
|
(1,548
|
)
|
Corporate
Items and Eliminations include the effects of eliminating transactions between
operating segments; results of our insurance activities remaining in continuing
operations; certain items in our treasury operations; cost of, and cost
reductions from, our principal pension plans; underabsorbed corporate overhead;
certain non-allocated amounts described below; and a variety of sundry items.
Corporate Items and Eliminations is not an operating segment. Rather, it is
added to operating segment totals to reconcile to consolidated totals on the
financial statements.
Certain
amounts included in the line “Other” above are not allocated to segment results
for internal measurement purposes. In 2008, amounts primarily related to
restructuring, rationalization and other charges were $0.5 billion at each of
Capital Finance and NBC Universal, $0.4 billion at Technology Infrastructure and
$0.3 billion at each of Energy Infrastructure and Consumer & Industrial.
Included in these amounts in 2008 were technology and product development costs
of $0.2 billion at NBC Universal and $0.1 billion at Technology Infrastructure
and net losses on business exits of $0.2 billion at Capital Finance. In 2007,
amounts primarily related to restructuring, rationalization and other charges
were $0.5 billion at Technology Infrastructure, $0.4 billion at each of Consumer
& Industrial (including $0.1 billion of product quality issues) and Capital
Finance, $0.3 billion at NBC Universal, and $0.2 billion at Energy
Infrastructure. Included in these amounts in 2007 were technology and product
development costs of $0.1 billion at NBC Universal. GECS amounts are on an
after-tax basis.
Corporate
Items and Eliminations include the elimination of transactions between our
segments. In 2007, revenues, eliminations and other included a $0.9 billion gain
on sale of a business interest to Hitachi by the Energy business and a $0.6
billion gain on sale of Swiss Re common stock.
Other
operating profit (cost) reflects a $0.9 billion gain on sale of a business
interest to Hitachi by the Energy business and a $0.3 billion (after-tax basis)
gain on sale of Swiss Re common stock in 2007 and gains from sales of business
interests of $0.4 billion in 2006, principally GE Supply.
Discontinued
Operations
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Earnings
(loss) from discontinued
|
|||||||||
|
operations,
net of taxes
|
$
|
(679
|
)
|
$
|
(249
|
)
|
$
|
1,398
|
Discontinued
operations comprised GE Money Japan; WMC; Plastics; Advanced Materials; GE Life,
our U.K.-based life insurance operation; the property and casualty insurance and
reinsurance businesses and the European life and health operations of GE
Insurance Solutions and most of its affiliates; and Genworth, our formerly
wholly-owned subsidiary that conducted most of our consumer insurance business,
including life and mortgage insurance operations. Results of these businesses
are reported as discontinued operations for all periods presented.
During
the third quarter of 2007, we committed to a plan to sell our Lake business and
recorded an after-tax loss of $0.9 billion, which represents the difference
between the net book value of our Lake business and the projected sale price.
During 2008, we completed the sale of GE Money Japan, which included Lake, along
with our Japanese mortgage and card businesses, excluding our minority ownership
interest in GE Nissen Credit Co., Ltd. In connection with this sale, and
primarily related to our Japanese mortgage and card businesses, we recorded an
incremental $0.4 billion loss in 2008.
(35)
In
December 2007, we completed the sale of our WMC business for $0.1 billion in
cash, recognizing an after-tax loss of $0.1 billion. In connection with the
transaction, certain contractual obligations and potential liabilities related
to previously sold loans were retained.
In
August 2007, we completed the sale of our Plastics business to Saudi Basic
Industries Corporation for $11.6 billion in cash. As a result, we recognized an
after-tax gain of $1.6 billion.
Loss
from discontinued operations, net of taxes, in 2008 was $0.7 billion, primarily
reflecting a loss from operations ($0.3 billion), and the estimated incremental
loss on disposal ($0.4 billion) at GE Money Japan.
Loss
from discontinued operations, net of taxes, in 2007 was $0.2 billion, reflecting
a loss from operations at WMC ($0.9 billion), an estimated after-tax loss on the
planned sale of Lake ($0.9 billion), a loss from operations at GE Money Japan
($0.3 billion), and an after-tax loss on the sale of our WMC business ($0.1
billion), partially offset by a tax adjustment related to the 2004 initial
public offering of Genworth ($0.1 billion). This was partially offset by an
after-tax gain on sale of our Plastics business ($1.6 billion) and earnings from
Plastics operations ($0.3 billion).
Earnings
from discontinued operations, net of taxes, in 2006 were $1.4 billion,
reflecting earnings at our Plastics and Advanced Materials businesses ($1.0
billion). Also included in these earnings were earnings at GE Money Japan and
WMC ($0.3 billion), Genworth ($0.2 billion) and GE Insurance Solutions ($0.1
billion), partially offset by a loss at GE Life ($0.2 billion).
For
additional information related to discontinued operations, see Note 2 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Our
global activities span all geographic regions and primarily encompass
manufacturing for local and export markets, import and sale of products produced
in other regions, leasing of aircraft, sourcing for our plants domiciled in
other global regions and provision of financial services within these regional
economies. Thus, when countries or regions experience currency and/or economic
stress, we often have increased exposure to certain risks, but also often have
new profit opportunities. Potential increased risks include, among other things,
higher receivable delinquencies and bad debts, delays or cancellations of sales
and orders principally related to power and aircraft equipment, higher local
currency financing costs and slowdown in established financial services
activities. New profit opportunities include, among other things, more
opportunities for lower cost outsourcing, expansion of industrial and financial
services activities through purchases of companies or assets at reduced prices
and lower U.S. debt financing costs.
Revenues
are classified according to the region to which products and services are sold.
For purposes of this analysis, U.S. is presented separately from the remainder
of the Americas. We classify certain operations that cannot meaningfully be
associated with specific geographic areas as “Other Global” for this
purpose.
Geographic
Revenues
|
(In
billions)
|
2008
|
2007
|
2006
|
||||||
|
U.S.
|
$
|
85.3
|
$
|
86.2
|
$
|
81.1
|
|||
|
Europe
|
44.0
|
39.9
|
32.6
|
||||||
|
Pacific
Basin
|
23.6
|
21.8
|
17.7
|
||||||
|
Americas
|
14.8
|
12.6
|
11.5
|
||||||
|
Middle
East and Africa
|
10.1
|
8.0
|
5.5
|
||||||
|
Other
Global
|
4.7
|
4.0
|
3.2
|
||||||
|
Total
|
$
|
182.5
|
$
|
172.5
|
$
|
151.6
|
Global
revenues rose 13% to $97.2 billion in 2008, compared with $86.3 billion and
$70.5 billion in 2007 and 2006, respectively. Global revenues to external
customers as a percentage of consolidated revenues were 53% in 2008, compared
with 50% and 47% in 2007 and 2006, respectively. The effects of currency
fluctuations on reported results were to increase revenues by $2.0 billion, $4.0
billion and $0.1 billion in 2008, 2007 and 2006, respectively.
(36)
GE
global revenues in 2008 were $59.4 billion, up 19% over 2007, led by increases
at Energy Infrastructure and Technology Infrastructure, primarily in the Middle
East and Africa, Europe and the Pacific Basin. GE global revenues as a
percentage of total GE revenues was 53% in 2008, compared with 50% and 48% in
2007 and 2006, respectively. GE global revenues were $49.8 billion in 2007, up
16% over 2006, led by increases at Energy Infrastructure and Technology
Infrastructure, primarily in the Middle East and Africa, Europe and the Pacific
Basin.
GECS
global revenues rose 4% to $37.8 billion in 2008, compared with $36.5 billion
and $27.5 billion in 2007 and 2006, respectively. GECS global revenues as a
percentage of total GECS revenues were 53% in 2008, compared with 51% and 45% in
2007 and 2006, respectively. The effects of currency fluctuations on reported
results were to increase revenues by $1.2 billion and $2.3 billion in 2008 and
2007, respectively, compared with a decrease of $0.1 billion in
2006.
GECS
revenues in the Middle East and Africa grew 25% in 2008, primarily as a result
of organic revenue growth at GECAS. Revenues grew 11% in the Americas and 6% in
Europe in 2008, primarily as a result of organic revenue growth, acquisitions
and the effects of the weaker U.S. dollar, primarily at GE Money and CLL.
Revenues in the Pacific Basin remained flat in 2008 from 2007.
Total
Assets (continuing operations)
|
December
31 (In billions)
|
2008
|
2007
|
||||
|
U.S.
|
$
|
395.6
|
$
|
364.5
|
||
|
Europe
|
228.0
|
236.5
|
||||
|
Pacific
Basin
|
75.0
|
87.8
|
||||
|
Americas
|
40.9
|
42.6
|
||||
|
Other
Global
|
56.5
|
55.4
|
||||
|
Total
|
$
|
796.0
|
$
|
786.8
|
Total
assets of global operations on a continuing basis were $400.4 billion in 2008, a
decrease of $21.9 billion, or 5%, from 2007. GECS global assets on a continuing
basis of $328.4 billion at the end of 2008 were 10% lower than at the end of
2007, reflecting core declines and the effects of the stronger U.S. dollar in
Europe, the Pacific Basin and the Americas, partially offset by acquisitions,
primarily at GE Money and CLL.
Financial
results of our global activities reported in U.S. dollars are affected by
currency exchange. We use a number of techniques to manage the effects of
currency exchange, including selective borrowings in local currencies and
selective hedging of significant cross-currency transactions. Such principal
currencies are the pound sterling, the euro, the Japanese yen and the Canadian
dollar.
Environmental
Matters
Our
operations, like operations of other companies engaged in similar businesses,
involve the use, disposal and cleanup of substances regulated under
environmental protection laws. We are involved in a sizable number of
remediation actions to clean up hazardous wastes as required by federal and
state laws. Such statutes require that responsible parties fund remediation
actions regardless of fault, legality of original disposal or ownership of a
disposal site. Expenditures for site remediation actions amounted to
approximately $0.3 billion in 2008 and $0.2 billion in 2007. We presently expect
that such remediation actions will require average annual expenditures in the
range of $0.3 billion to $0.4 billion over the next two years.
In
November 2006, the United States Federal District Court approved a consent
decree, which had been agreed to by GE and the United States Environmental
Protection Agency (EPA), that represents a comprehensive framework for
implementation of the EPA’s 2002 decision to dredge polychlorinated biphenyl
(PCB)-containing sediments in the upper Hudson River. The dredging will be
performed in two phases with an intervening peer review of performance after the
first phase. Under the consent decree, we have committed to reimburse the EPA
for its past and future project oversight costs and to perform the first phase
of dredging, which is scheduled to proceed from May through November of 2009.
After completion of the peer review, currently scheduled for 2010, we may be
responsible for further costs. Our Statement of Financial Position as of
December 31, 2008 and 2007, included liabilities for the probable and estimable
costs of the agreed upon remediation activities.
(37)
Financial
Resources and Liquidity
This
discussion of financial resources and liquidity addresses the Statement of
Financial Position, the Statement of Changes in Shareowners’ Equity, the
Statement of Cash Flows, Contractual Obligations, Off-Balance Sheet
Arrangements, and Debt Instruments, Guarantees and Covenants.
The
fundamental differences between GE and GECS are reflected in the measurements
commonly used by investors, rating agencies and financial analysts.
Overview
of Financial Position
Major
changes to our shareowners’ equity are discussed in the Consolidated Statement
of Changes in Shareowners’ Equity section. In addition, other significant
changes to balances in our Statement of Financial Position follow.
Statement
of Financial Position
Because
GE and GECS share certain significant elements of their Statements of Financial
Position – property, plant and equipment and borrowings, for example – the
following discussion addresses significant captions in the “consolidated”
statement. Within the following discussions, however, we distinguish between GE
and GECS activities in order to permit meaningful analysis of each individual
consolidating statement.
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 amounted to $41.4 billion at
December 31, 2008, compared with $45.3 billion at December 31, 2007. Of the
amount at December 31, 2008, we held debt securities with an estimated fair
value of $33.9 billion, which included residential mortgage-backed securities
(RMBS) and commercial mortgage-backed securities (CMBS) with estimated fair
values of $4.3 billion and $2.1 billion, respectively. Unrealized losses on debt
securities were $5.4 billion and $1.1 billion at December 31, 2008, and December
31, 2007, respectively. This amount included unrealized losses on RMBS and CMBS
of $1.1 billion and $0.8 billion at the end of 2008, as compared with $0.2
billion and an insignificant amount, respectively, at the end of 2007.
Unrealized losses increased as a result of continuing market deterioration, and
we believe primarily represent adjustments for liquidity on investment-grade
securities.
Of the
$4.3 billion of RMBS, our exposure to subprime credit was approximately $1.3
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 2008 and an insignificant amount of such securities in 2007. 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 our 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 December 31, 2008, 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.
When an
other-than-temporary impairment is recognized for a debt security, the charge
has two components: (1) the loss of contractual cash flows due to the inability
of the issuer (or the insurer, if applicable) to pay all amounts due; and (2)
the effects of current market conditions, exclusive of credit losses, on the
fair value of the security (principally liquidity discounts and interest rate
effects). If the expected loss due to credit remains unchanged for the remaining
term of the debt instrument, the latter portion of the impairment charge is
subsequently accreted to earnings as interest income over the remaining term of
the instrument. When a security is insured, a credit loss event is deemed to
have occurred if the insurer is expected to be unable to cover its obligations
under the related insurance contract.
(38)
Other-than-temporary
impairment losses totaled $1.6 billion in 2008 and $0.1 billion in 2007. In
2008, we recognized other-than-temporary impairments, primarily relating to
retained interests in our securitization arrangements, RMBS and corporate debt
securities of infrastructure, financial institutions and media companies. In
2007, we recognized other-than-temporary impairments, primarily for our retained
interests in our securitization arrangements. Investments in retained interests
in securitization arrangements also decreased by $0.1 billion during 2008,
reflecting declines in fair value accounted for in accordance with a new
accounting standard that became effective at the beginning of 2007.
Monoline
insurers (Monolines) provide credit enhancement for certain of our investment
securities. At December 31, 2008, our investment securities insured by Monolines
totaled $3.1 billion, including $1.1 billion of our $1.3 billion investment in
subprime RMBS. Although several of the Monolines have been downgraded by the
rating agencies, a majority of the $3.1 billion is insured by investment-grade
Monolines. The Monoline industry continues to experience financial stress from
increasing delinquencies and defaults on the individual loans underlying insured
securities. We regularly monitor changes to the expected cash flows of the
securities we hold, and the ability of these insurers to pay claims on
securities with expected losses. At December 31, 2008, if the Monolines were
unable to pay our anticipated claims based on the expected future cash flows of
the securities, we would have recorded an impairment charge of $0.3 billion, of
which $0.1 billion would relate to expected credit losses and the remaining $0.2
billion would relate to other market factors.
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
December 31, 2008, $0.7 billion of unrealized loss was at risk of being charged
to earnings assuming no further changes in price, and that amount primarily
related to investments in RMBS and CMBS securities, equity securities,
securitization retained interests, and corporate debt securities of financial
institutions and media companies. 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 $0.4 billion.
Continued uncertainty in the capital markets may cause increased levels of
other-than-temporary impairments.
At
December 31, 2008, unrealized losses on investment securities totaled $5.7
billion, including $3.5 billion aged 12 months or longer, compared with
unrealized losses of $1.3 billion, including $0.5 billion aged 12 months or
longer at December 31, 2007. Of the amount aged 12 months or longer at December
31, 2008, more than 80% of our debt securities were considered to be
investment-grade by the major rating agencies. In addition, of the amount aged
12 months or longer, $1.9 billion and $1.4 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 December 31, 2008, 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 9 to the consolidated financial statements in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K
Report.
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. Adoption of SFAS 157 did not have a material effect
on our financial position or results of operations. During the fourth quarter,
our methodology remained consistent with prior quarters for measuring fair value
of financial instruments trading in volatile markets. Additional information
about our application of SFAS 157 is provided in Note 28 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report.
Working capital, representing
GE current receivables and inventories, less GE accounts payable and progress
collections, was $3.9 billion at December 31, 2008, down $2.5 billion from
December 31, 2007, reflecting higher progress collections at Energy. As
Energy delivers units out of its backlog over the next few years, progress
collections of $13.1 billion at December 31, 2008, will be earned, affecting
working capital adversely. Nonetheless, our performance is expected to improve
in 2009 as a result of our Operating Council’s initiatives (e.g., lean projects
on cycle time), which will significantly offset the decrease in progress
collections.
We
discuss current receivables and inventories, two important elements of working
capital, in the following paragraphs.
(39)
Current receivables for GE
amounted to $15.1 billion at both the end of 2008 and 2007, and included $11.3
billion due from customers at the end of 2008 compared with $11.0 billion at the
end of 2007. GE current receivables turnover was 7.5 in 2008, compared with 7.3
in 2007. See Note 10 to the consolidated financial statements in Part II, Item
8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Inventories for GE amounted to
$13.6 billion at December 31, 2008, up $0.8 billion from the end of 2007.
This increase reflected higher inventories from purchases at Energy
Infrastructure. GE inventory turnover was 8.0 and 8.3 in 2008 and 2007,
respectively. See Note 11 to the consolidated financial statements in Part II,
Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
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; and “nonearning”
receivables are those that are 90 days or more past due (or for which collection
has otherwise become doubtful).
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 42% 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 58% 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, 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.
(40)
|
Financing
receivables
|
Nonearning
receivables
|
Allowance
for
losses
|
||||||||||||||||
|
December
31 (In millions)
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
CLL
|
||||||||||||||||||
|
Equipment
and
|
||||||||||||||||||
|
leasing
and other
|
$
|
99,769
|
$
|
96,817
|
$
|
1,526
|
$
|
939
|
$
|
894
|
$
|
661
|
||||||
|
Commercial
and
|
||||||||||||||||||
|
industrial
|
64,332
|
58,863
|
1,128
|
757
|
415
|
276
|
||||||||||||
|
GE
Money
|
||||||||||||||||||
|
Non-U.S.
residential
|
||||||||||||||||||
|
mortgages
|
59,595
|
73,042
|
3,317
|
2,465
|
382
|
246
|
||||||||||||
|
Non-U.S.
installment
|
||||||||||||||||||
|
and
revolving credit
|
24,441
|
34,669
|
413
|
533
|
1,051
|
1,371
|
||||||||||||
|
U.S.
installment and
|
||||||||||||||||||
|
revolving
credit
|
27,645
|
27,914
|
758
|
515
|
1,700
|
985
|
||||||||||||
|
Non-U.S.
auto
|
18,168
|
27,368
|
83
|
75
|
222
|
324
|
||||||||||||
|
Other
|
9,244
|
10,198
|
152
|
91
|
214
|
162
|
||||||||||||
|
Real
Estate(a)
|
46,735
|
32,228
|
194
|
25
|
301
|
168
|
||||||||||||
|
Energy
Financial
|
||||||||||||||||||
|
Services
|
8,392
|
7,898
|
241
|
–
|
58
|
19
|
||||||||||||
|
GECAS
|
15,429
|
14,197
|
146
|
–
|
60
|
8
|
||||||||||||
|
Other
|
4,031
|
5,111
|
38
|
71
|
28
|
18
|
||||||||||||
|
Total
|
$
|
377,781
|
$
|
388,305
|
$
|
7,996
|
$
|
5,471
|
$
|
5,325
|
$
|
4,238
|
||||||
|
(a)
|
Financing
receivables included $731 million and $452 million of construction loans
at December 31, 2008 and 2007,
respectively.
|
(41)
|
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
|
||||||||||||||||
|
December
31
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
CLL
|
||||||||||||||||||
|
Equipment
and
|
||||||||||||||||||
|
leasing
and other
|
1.5
|
%
|
1.0
|
%
|
58.6
|
%
|
70.4
|
%
|
0.9
|
%
|
0.7
|
%
|
||||||
|
Commercial
and
|
||||||||||||||||||
|
industrial
|
1.8
|
1.3
|
36.8
|
36.5
|
0.6
|
0.5
|
||||||||||||
|
GE
Money
|
||||||||||||||||||
|
Non-U.S.
residential
|
||||||||||||||||||
|
mortgages
|
5.6
|
3.4
|
11.5
|
10.0
|
0.6
|
0.3
|
||||||||||||
|
Non-U.S.
installment
|
||||||||||||||||||
|
and
revolving credit
|
1.7
|
1.5
|
254.5
|
257.2
|
4.3
|
4.0
|
||||||||||||
|
U.S.
installment and
|
||||||||||||||||||
|
revolving
credit
|
2.7
|
1.8
|
224.3
|
191.3
|
6.1
|
3.5
|
||||||||||||
|
Non-U.S.
auto
|
0.5
|
0.3
|
267.5
|
432.0
|
1.2
|
1.2
|
||||||||||||
|
Other
|
1.6
|
0.9
|
140.8
|
178.0
|
2.3
|
1.6
|
||||||||||||
|
Real
Estate
|
0.4
|
0.1
|
155.2
|
672.0
|
0.6
|
0.5
|
||||||||||||
|
Energy
Financial
|
||||||||||||||||||
|
Services
|
2.9
|
–
|
24.1
|
–
|
0.7
|
0.2
|
||||||||||||
|
GECAS
|
0.9
|
–
|
41.1
|
–
|
0.4
|
0.1
|
||||||||||||
|
Other
|
0.9
|
1.4
|
73.7
|
25.4
|
0.7
|
0.4
|
||||||||||||
|
Total
|
2.1
|
1.4
|
66.6
|
77.5
|
1.4
|
1.1
|
||||||||||||
The
majority of the allowance for losses of $5.3 billion at December 31, 2008, and
$4.2 billion at December 31, 2007, is determined based upon a formulaic
approach. Further information on the determination of the allowance for losses
on financing receivables is provided in the Critical Accounting Estimates
section in Part II, Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and Notes 1 and 13 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report.
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, Accounting by Creditors for
Impairment of a Loan. 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 $0.6
billion and $0.4 billion at December 31, 2008 and December 31, 2007,
respectively. Further information pertaining to specific reserves is included in
the table below.
(42)
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Loans
requiring allowance for losses
|
$
|
2,712
|
$
|
986
|
||
|
Loans
expected to be fully recoverable
|
871
|
391
|
||||
|
Total
impaired loans
|
$
|
3,583
|
$
|
1,377
|
||
|
Allowance
for losses
|
$
|
635
|
$
|
361
|
||
|
Average
investment during year
|
2,064
|
1,576
|
||||
|
Interest
income earned while impaired(a)
|
27
|
19
|
||||
|
(a)
|
Recognized
principally on cash basis.
|
The
portfolio of financing receivables, before allowance for losses, was $377.8
billion at December 31, 2008, and $388.3 billion at December 31, 2007. Financing
receivables, before allowance for losses, decreased $10.5 billion from December
31, 2007, primarily as a result of commercial and equipment securitization and
sales ($36.7 billion), the stronger U.S. dollar ($29.4 billion) and dispositions
($7.0 billion), partially offset by core growth ($42.9 billion) and acquisitions
($31.9 billion).
Related
nonearning receivables totaled $8.0 billion (2.1% of outstanding receivables) at
December 31, 2008, compared with $5.5 billion (1.4% of outstanding receivables)
at December 31, 2007. Related nonearning receivables increased from December 31,
2007, primarily because of rising unemployment, along with the increasingly
challenging global economic environment.
The
allowance for losses at December 31, 2008, totaled $5.3 billion compared with
$4.2 billion at December 31, 2007, representing our best estimate of probable
losses inherent in the portfolio and reflecting the then current credit and
economic environment. Allowance for losses increased $1.1 billion from December
31, 2007, primarily because of increasing delinquencies and nonearning
receivables reflecting the continued weakened economic and credit environment.
Coincident with the changes in the environment, we saw a significant increase in
delinquencies in the latter half of 2008, particularly in the fourth quarter. As
the environment worsened in the latter half of the year, we recognized
provisions accordingly.
CLL – Equipment and leasing and
other. Nonearning receivables of $1.5 billion represented 19.1% of total
nonearning receivables at December 31, 2008. The ratio of allowance for losses
as a percent of nonearning receivables declined from 70.4% at December 31, 2007,
to 58.6% at December 31, 2008, primarily from an increase in secured exposures
which did not require specific reserves based upon the strength of the
underlying collateral values.
CLL – Commercial and industrial.
Nonearning receivables of $1.1 billion represented 14.1% of total
nonearning receivables at December 31, 2008. The ratio of allowance for losses
as a percent of nonearning receivables increased from 36.5% at December 31,
2007, to 36.8% at December 31, 2008. The ratio of nonearning receivables as a
percentage of financing receivables increased from 1.3% at December 31, 2007, to
1.8% at December 31, 2008, primarily from an increase in nonearning receivables
in secured lending in media and communications, auto and transportation, and
consumer manufacturing companies.
GE Money – non-U.S. residential
mortgages. Nonearning receivables of $3.3 billion represented 41.5% of
total nonearning receivables at December 31, 2008. The ratio of allowance for
losses as a percent of nonearning receivables increased from 10.0% at December
31, 2007, to 11.5% at December 31, 2008. Our non-U.S. mortgage portfolio has a
loan-to-value of approximately 74% at origination and the vast majority are
first lien positions. In addition, we carry mortgage insurance on most first
mortgage loans originated at a loan-to-value above 80%. In 2008, our nonearning
receivables increased primarily as a result of the declining U.K. housing market
and our allowance increased accordingly. At December 31, 2008, we had foreclosed
on fewer than 1,000 houses in the U.K.
GE Money – U.S. installment and
revolving credit. Nonearning receivables of $0.8 billion represented 9.5%
of total nonearning receivables at December 31, 2008. The ratio of allowance for
losses as a percent of nonearning receivables increased from 191.3% at December
31, 2007, to 224.3% at December 31, 2008, reflecting the effects of the
continued deterioration in our U.S. portfolio in connection with rising
unemployment.
(43)
GE Money – non-U.S. auto.
Nonearning receivables of $0.1 billion represented 1% of total nonearning
receivables at December 31, 2008. The ratio of allowance for losses as a percent
of nonearning receivables decreased from 432.0% at December 31, 2007, to 267.5%
at December 31, 2008. This is primarily a result of the disposition of our
Thailand auto business, the decision to dispose of our U.K. auto business, and
the effects of recoveries.
Delinquency
rates on managed equipment financing loans and leases and managed consumer
financing receivables follow.
|
December
31
|
2008
|
2007
|
2006
|
||||||
|
Equipment
financing
|
2.17
|
%
|
1.21
|
%
|
1.22
|
%
|
|||
|
Consumer
|
7.47
|
5.38
|
5.22
|
||||||
|
U.S.
|
7.14
|
5.52
|
4.93
|
||||||
|
Non-U.S.
|
7.64
|
5.32
|
5.34
|
Delinquency
rates on equipment financing loans and leases increased from December 31, 2007,
and December 31, 2006, to December 31, 2008, primarily as a result of the
inclusion of the CitiCapital acquisition and Sanyo acquisition in Japan, which
contributed an additional 12 and 9 basis points, respectively, at December 31,
2008, as well as deterioration in our U.S. commercial middle market and certain
European portfolios. 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, 2007, and
December 31, 2006, to December 31, 2008, primarily because of rising
unemployment, an increasingly challenging economic environment and lower volume.
This has resulted in continued deterioration in our U.S. and U.K. portfolios. In
response, GE Money has continued to tighten underwriting standards globally,
increased focus on collection effectiveness and will continue its 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 GE Money. At December 31, 2008, roughly 40% 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 December 31, 2008. See Notes 12 and 13 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Other GECS receivables totaled
$18.6 billion at December 31, 2008, and $22.1 billion at December 31,
2007, and consisted primarily of amounts due from GE (generally related to
certain material procurement programs of $3.0 billion at December 31, 2008 and
$2.9 billion at December 31, 2007), insurance receivables, amounts due from
Qualified Special Purpose Entities (QSPEs), nonfinancing customer receivables,
amounts accrued from investment income, amounts due under operating leases and
various sundry items.
Property, plant and equipment
totaled $78.5 billion at December 31, 2008, up $0.6 billion from 2007,
primarily reflecting acquisitions and additions of commercial aircraft at the
GECAS business of Capital Finance. GE property, plant and equipment consisted of
investments for its own productive use, whereas the largest element for GECS was
equipment provided to third parties on operating leases. Details by category of
investment are presented in Note 14 to the consolidated financial statements in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
GE
additions to property, plant and equipment totaled $3.0 billion in both 2008 and
2007. Total expenditures, excluding equipment leased to others, for the past
five years were $14.5 billion, of which 33% was investment for growth through
new capacity and product development; 31% was investment in productivity through
new equipment and process improvements; and 36% was investment for other
purposes such as improvement of research and development facilities and safety
and environmental protection.
GECS
additions to property, plant and equipment were $13.3 billion and $15.2 billion
during 2008 and 2007, respectively, primarily reflecting acquisitions and
additions of commercial aircraft at the GECAS business of Capital
Finance.
(44)
Goodwill and other intangible
assets totaled $81.8 billion and $15.0 billion, respectively, at December
31, 2008. Goodwill increased $0.6 billion from 2007, primarily from acquisitions
– including Hydril Pressure Control by Energy Infrastructure, Merrill Lynch
Capital by Capital Finance and Vital Signs at Technology Infrastructure,
partially offset by the effects of the stronger U.S. dollar and dispositions.
Other intangible assets decreased $1.2 billion from 2007, primarily from
amortization expense and the effects of the stronger U.S. dollar. See Note 15 to
the consolidated financial statements in Part II, Item 8. “Financial Statements
and Supplementary Data” of this Form 10-K Report.
All other assets totaled
$106.9 billion at year-end 2008, a decrease of $15.9 billion, reflecting
decreases in prepaid pension assets, assets held for sale and real estate,
partially offset by increases in derivative instruments and associated
companies. We recognized other-than-temporary impairments of cost and equity
method investments of $0.5 billion and $0.1 billion in 2008 and 2007,
respectively, including $0.2 billion relating to our cost method investment in
FGIC Corporation during 2008. See Note 16 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary Data” of
this Form 10-K Report.
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. 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.
The
global credit markets have recently experienced unprecedented volatility, which
has affected both the availability and cost of our funding sources. In this
current volatile credit environment, we have taken a number of initiatives to
strengthen our liquidity, maintain our dividend, and maintain the highest credit
ratings. Specifically, we have:
|
·
|
Reduced
the GECS dividend to GE from 40% to 10% of GECS earnings and suspended our
stock repurchase program.
|
|
·
|
Raised
$15 billion in cash through common and preferred stock offerings in
October 2008 and contributed $5.5 billion to GE Capital. In February 2009,
the GE Board authorized a capital contribution of up to $9.5 billion to GE
Capital, which is expected to be made in the first quarter of
2009.
|
|
·
|
Reduced
our commercial paper borrowings at GECS to $72 billion at December 31,
2008.
|
|
·
|
Targeted
to further reduce GECS commercial paper borrowings to $50 billion by the
end of 2009 and to target committed credit lines equal to GECS commercial
paper borrowings going forward.
|
|
·
|
Grown
our alternative funding to $54 billion at December 31, 2008, including $36
billion of bank deposits.
|
|
·
|
Registered
to use the Federal Reserve’s Commercial Paper Funding Facility (CPFF) for
up to $98 billion, which is available through October 31,
2009.
|
|
·
|
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.
|
Throughout
this period of volatility, we have been able to continue to meet our funding
needs at acceptable costs. We continue to access the commercial paper markets
without interruption.
During
2008, GECS and its affiliates issued $84.3 billion of senior, unsecured
long-term debt. This debt was both fixed and floating rate and was issued to
institutional and retail investors in the U.S. and 17 other global markets.
Maturities for these issuances ranged from one to 40 years.
(45)
During
the fourth quarter of 2008, the FDIC adopted the TLGP to address disruptions in
the credit market, particularly the interbank lending market, which reduced
banks’ liquidity and impaired their ability to lend. The goal of the TLGP is to
decrease the cost of bank funding so that bank lending to consumers and
businesses will normalize. The TLGP guarantees certain newly issued senior,
unsecured debt of banks, thrifts, and certain holding companies. Under the
FDIC’s Final Rule adopted on November 21, 2008, certain senior, unsecured debt
issued before June 30, 2009, with a maturity of greater than 30 days that
matures on or prior to June 30, 2012, is automatically included in the program.
GECC has elected to participate in this program. The fees associated with this
program range from 50 to 100 basis points on an annualized basis and vary
according to the maturity of the debt issuance. GECC also pays an additional 10
basis points, as it is not an insured depository institution. On February 10,
2009, in a Joint Statement, the Secretary of the Treasury, the Chairman of the
Board of Governors of the Federal Reserve, the Chairman of the FDIC, the
Comptroller of the Currency and the Director of the Office of Thrift Supervision
(OTS) announced that, for an additional premium, the FDIC will extend the Debt
Guarantee Program of the TLGP through October 2009.
Included
in GECS issuances above is $13.4 billion of senior, unsecured long-term debt
issued by GECC in the fourth quarter of 2008 under the TLGP with varying
maturities up to June 30, 2012. Additionally, GECC had commercial paper of $21.8
billion outstanding at December 31, 2008, which was issued under the TLGP (which
is required for all commercial paper issuances with maturities greater than 30
days).
In the
fourth quarter of 2008, GE Capital extended $21.8 billion of credit to U.S.
customers, including 5 million new accounts, and $7.7 billion of credit
(including unfunded commitments of $2.5 billion) to U.S. companies, with an
average transaction size of $2.4 million.
During
the fourth quarter of 2008, GECS issued commercial paper into the CPFF. The last
tranche of this commercial paper matures in February 2009. Although we do not
anticipate further utilization of the CPFF, it remains available until October
31, 2009. We incurred $0.6 billion of fees for our participation in the TLGP and
CPFF programs through December 31, 2008.
Our 2009
funding plan anticipates approximately $45 billion of senior, unsecured
long-term debt issuance. In January 2009, we completed issuances of $11.0
billion funding under the TLGP. We also issued $5.1 billion in non-guaranteed
senior, unsecured debt with a maturity of 30 years under the non-guarantee
option of the TLGP. These issuances, along with the $13.4 billion of pre-funding
done in December 2008, bring our aggregate issuances to $29.5 billion or 66% of
our anticipated 2009 funding plan. Additionally, we anticipate that we will be
90% complete with our 2009 funding plan by June 30, 2009.
We
maintain securitization capability in most of the asset classes we have
traditionally securitized. However, these capabilities have been, and continue
to be, more limited than in 2007. We have continued to execute new
securitizations utilizing bank commercial paper conduits. Securitization
proceeds were $17.8 billion and $76.8 billion during the three months and the
year ended December 31, 2008, respectively. Comparable amounts were $23.4
billion and $84.4 billion, for the three months and the year ended December 31,
2007, respectively.
We have
successfully grown our alternative funding to $54 billion at December 31, 2008,
including $36 billion of bank deposits. Deposits increased by $24.8 billion
since January 1, 2008. 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 deposits (CDs) distributed by brokers in
maturity terms from three months to ten years. Total outstanding CDs at these
two banks at December 31, 2008, were $24.5 billion. We expect deposits to
continue to grow and constitute a greater percentage of our total funding in the
future.
In the
event we cannot sufficiently access our normal sources of funding, we have a
number of alternative sources of liquidity available, including cash balances
and collections, marketable securities and credit lines. In the event these
sources are not sufficient to repay commercial paper and term debt as it becomes
due or to meet our other liquidity needs, we can access the CPFF and the TLGP
and/or seek other sources of funding.
Our cash
and equivalents were $48.2 billion at December 31, 2008. 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. At GECS, we are managing
collections versus originations to help support liquidity needs and are
estimating $25 billion of excess collections in 2009.
(46)
Committed,
unused credit lines totaling $60.0 billion had been extended to us by 65
financial institutions at December 31, 2008. These lines include $37.4 billion
of revolving credit agreements under which we can borrow funds for periods
exceeding one year. Additionally, $21.3 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.
Exchange rate and interest rate
risks are managed with a variety of techniques, including match funding
and selective use of derivatives. We use derivatives to mitigate or eliminate
certain financial and market risks because we conduct business in diverse
markets around the world and local funding is not always efficient. In addition,
we use derivatives to adjust the debt we are issuing to match the fixed or
floating nature of the assets we are acquiring. We apply strict policies to
manage each of these risks, including prohibitions on derivatives market-making
or other speculative activities. Following is an analysis of the potential
effects of changes in interest rates and currency exchange rates using so-called
“shock” tests that model effects of shifts in rates. These are not
forecasts.
|
·
|
It
is our policy to minimize exposure to interest rate changes. We fund our
financial investments using debt or a combination of debt and hedging
instruments so that the interest rates of our borrowings match the
expected yields on our assets. To test the effectiveness of our positions,
we assumed that, on January 1, 2009, interest rates increased by 100 basis
points across the yield curve (a “parallel shift” in that curve) and
further assumed that the increase remained in place for 2009. We
estimated, based on the year-end 2008 portfolio and holding everything
else constant, that our 2009 consolidated net earnings would decline by
$0.1 billion.
|
|
·
|
It
is our policy to minimize currency exposures and to conduct operations
either within functional currencies or using the protection of hedge
strategies. We analyzed year-end 2008 consolidated currency exposures,
including derivatives designated and effective as hedges, to identify
assets and liabilities denominated in other than their relevant functional
currencies. For such assets and liabilities, we then evaluated the effects
of a 10% shift in exchange rates between those currencies and the U.S.
dollar. This analysis indicated that there would be an inconsequential
effect on 2009 earnings of such a shift in exchange
rates.
|
Consolidated
Statement of Changes in Shareowners’ Equity
Shareowners’
equity decreased by $10.9 billion in 2008, compared with increases of $4.1
billion and $2.9 billion in 2007 and 2006, respectively.
Over the
three-year period, net earnings increased equity by $17.4 billion, $22.2 billion
and $20.7 billion, partially offset by dividends declared of $12.6 billion,
$11.7 billion and $10.7 billion in 2008, 2007 and 2006,
respectively.
Elements
of Other Comprehensive Income reduced shareowners’ equity by $30.2 billion in
2008, compared with increases of $5.1 billion and $0.1 billion in 2007 and 2006,
respectively, inclusive of changes in accounting principles. The components of
these changes are as follows:
|
·
|
Changes
in benefit plans reduced shareowners’ equity by $13.3 billion in 2008,
reflecting declines in the fair value of plan assets as a result of market
conditions and adverse changes in the economic environment. This compared
with increases of $2.6 billion and $0.3 billion in 2007 and 2006,
respectively. In addition, adoption of SFAS 158, Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, at December
31, 2006, reduced shareowners’ equity by $3.8 billion. Further information
about changes in benefit plans is provided in Note 6 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K
Report.
|
|
·
|
Currency
translation adjustments decreased shareowners’ equity by $11.0 billion in
2008 and increased equity by $4.5 billion and $3.6 billion in 2007 and
2006, respectively. Changes in currency translation adjustments reflect
the effects of changes in currency exchange rates on our net investment in
non-U.S. subsidiaries that have functional currencies other than the U.S.
dollar. At the end of 2008, the U.S. dollar was stronger against most
major currencies, including the pound sterling, the Australian dollar and
the euro, compared with a weaker dollar against those currencies at the
end of 2007 and 2006. The dollar was weaker against the Japanese yen in
2008 and 2007.
|
|
·
|
Net
unrealized losses on investment securities reduced shareowners’ equity by
$3.2 billion in 2008, reflecting adverse market conditions on the fair
value of securities classified as available for sale, primarily corporate
debt and mortgage-backed securities. The change in fair value of
investment securities decreased shareowners’ equity by $1.5 billion and
$0.2 billion in 2007 and 2006, respectively. Further information about
investment securities is provided in Note 9 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report.
|
(47)
|
·
|
Changes
in the fair value of derivatives designated as cash flow hedges decreased
shareowners’ equity by $2.7 billion in 2008, primarily reflecting the
effect of lower interest rates on interest rate and currency swaps. The
change in the fair value of derivatives designated as cash flow hedges
decreased equity by $0.5 billion in 2007 and increased equity by $0.2
billion in 2006. Further information about the fair value of derivatives
is provided in Note 29 to the consolidated financial statements in Part
II, Item 8. “Financial Statements and Supplementary Data” of this Form
10-K Report.
|
As
discussed in the previous Liquidity and Borrowings section, in the fourth
quarter of 2008 we took a number of actions to strengthen our liquidity,
maintain our dividend and maintain the highest credit ratings on our borrowing
capability. Actions that were taken that affected our 2008 shareowners’ equity
included:
|
·
|
We
raised $12.0 billion from the issuance of 547.8 million shares of common
stock at an issuance price of $22.25 per
share.
|
|
·
|
We
issued 30,000 shares of preferred stock and related warrants for $3.0
billion in proceeds.
|
|
·
|
We
suspended our share repurchase
program.
|
As a
result of these actions, Other Capital increased by $14.3 billion in 2008,
compared with increases of $0.6 billion and $0.3 billion in 2007 and 2006,
respectively.
Overview
of Our Cash Flow from 2006 through 2008
Consolidated
cash and equivalents were $48.2 billion at December 31, 2008, an increase of
$32.5 billion from December 31, 2007. Cash and equivalents amounted to $15.7
billion at December 31, 2007, an increase of $1.6 billion from December 31,
2006.
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, as well as financing receivables
collections, sales and securitizations.
GE
Cash Flow
GE CFOA
is a useful measure of performance for our non-financial businesses and totaled
$19.1 billion in 2008, $23.3 billion in 2007 and $23.8 billion in 2006.
Generally, factors that affect our earnings – for example, pricing, volume,
costs and productivity – affect CFOA similarly. However, while management of
working capital, including timing of collections and payments and levels of
inventory, affects operating results only indirectly, the effect of these
programs on CFOA can be significant.
Our GE
Statement of Cash Flows shows CFOA in the required format. While that display is
of some use in analyzing how various assets and liabilities affected our
year-end cash positions, we believe that it is also useful to supplement that
display and to examine in a broader context the business activities that provide
and require cash.
|
December
31 (In billions)
|
2008
|
2007
|
2006
|
||||||
|
Operating
cash collections
|
$
|
115.5
|
$
|
102.8
|
$
|
90.6
|
|||
|
Operating
cash payments
|
(98.8
|
)
|
(86.8
|
)
|
(76.6
|
)
|
|||
|
Cash
dividends from GECS
|
2.4
|
7.3
|
9.8
|
||||||
|
GE
cash from operating activities (GE CFOA)
|
$
|
19.1
|
$
|
23.3
|
$
|
23.8
|
(48)
The most
significant source of cash in CFOA is customer-related activities, the largest
of which is collecting cash following a product or services sale. GE operating
cash collections increased by $12.7 billion in 2008 and $12.2 billion in 2007.
These increases are consistent with the changes in comparable GE operating
segment revenues, comprising Energy Infrastructure, Technology Infrastructure,
NBC Universal and Consumer & Industrial. Analyses of operating segment
revenues discussed in the preceding Segment Operations section is 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 materials and services necessary in
a diversified global organization. GE operating cash payments increased by $12.0
billion in 2008 and by $10.2 billion in 2007, comparable to the increases in GE
total costs and expenses.
Dividends
from GECS represented distribution of a portion of GECS retained earnings,
including special dividends from proceeds from certain business sales, and are
distinct from cash from continuing operating activities within the financial
services businesses, which increased in 2008 by $6.2 billion to $31.2 billion,
following an increase of $3.4 billion in 2007. 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 third quarter of 2008, we reduced our dividend from GECS from
40% to 10% of GECS earnings.
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 in any
given period. The incremental cash generated or used from the sale of customer
receivables (net effect) is the amount of cash received for receivables sold in
a period less the amount of cash collected on receivables previously sold. This
net effect represents the cash generated or used in the period related to this
activity. The incremental cash generated in GE CFOA from selling these
receivables to GECS decreased GE CFOA by $0.1 billion in 2008, and increased GE
CFOA by $0.3 billion and $2.0 billion in 2007 and 2006, respectively. See Note
26 to the consolidated financial statements in Part II, Item 8. “Financial
Statements and Supplementary Data” of this Form 10-K Report for additional
information about the elimination of intercompany transactions between GE and
GECS.
GECS
Cash Flow
GECS
cash and equivalents aggregated $37.5 billion at December 31, 2008, compared
with $9.4 billion at December 31, 2007. GECS CFOA totaled $31.2 billion in 2008,
compared with $25.0 billion in 2007. The increase is primarily the result of
increased collections of interest from loans and finance leases and rental
income from operating leases, resulting primarily from core growth and currency
exchange; and increases in cash collateral received from counterparties on
derivative contracts. These increases were partially offset by increases in
interest payments resulting from increased borrowings and taxes
paid.
GECS
principal use of cash has been investing in assets to grow its businesses. Of
the $28.6 billion that GECS invested during 2008, $17.4 billion was used for
additions to financing receivables; $13.3 billion was used to invest in new
equipment, principally for lease to others; and $25.0 billion was used for
acquisitions of new businesses, the largest of which were Merrill Lynch Capital,
CitiCapital and Bank BPH in 2008. This use of cash was partially offset by
proceeds from dispositions of property, plant and equipment of $11.0 billion and
proceeds from sales of discontinued operations and principal businesses of $10.1
billion.
GECS
paid dividends to GE through a distribution of its retained earnings, including
special dividends from proceeds of certain business sales. Dividends paid to GE
totaled $2.4 billion in 2008, compared with $7.3 billion in 2007. There were no
special dividends paid to GE in 2008, compared with $2.4 billion in 2007. During
2008, GECS borrowings with maturities of 90 days or less decreased by $31.3
billion. New borrowings of $122.5 billion having maturities longer than 90 days
were added during 2008, while $67.1 billion of such long-term borrowings were
retired.
Intercompany
Eliminations
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividends to GE; 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 26 to the consolidated financial statements in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K Report for
further information related to intercompany eliminations.
(49)
The lack
of a current-year counterpart to last year’s $2.4 billion GECS special dividend
and a $2.5 billion decrease in GECS ordinary dividend are the primary reasons
for the decrease in the amount of intercompany eliminations referred to
above.
Contractual
Obligations
As
defined by reporting regulations, our contractual obligations for future
payments as of December 31, 2008, follow.
|
Payments
due by period
|
|||||||||||||||
|
(In
billions)
|
Total
|
2009
|
2010-
2011
|
2012-
2013
|
2014
and
thereafter
|
||||||||||
|
Borrowings
(Note 18)
|
$
|
523.8
|
$
|
193.7
|
$
|
115.6
|
$
|
79.8
|
$
|
134.7
|
|||||
|
Interest
on borrowings
|
142.0
|
20.0
|
29.0
|
18.0
|
75.0
|
||||||||||
|
Operating
lease obligations (Note 5)
|
6.6
|
1.3
|
2.2
|
1.6
|
1.5
|
||||||||||
|
Purchase
obligations(a)(b)
|
63.0
|
40.0
|
16.0
|
6.0
|
1.0
|
||||||||||
|
Insurance
liabilities (Note 19)(c)
|
22.0
|
3.0
|
5.0
|
3.0
|
11.0
|
||||||||||
|
Other
liabilities(d)
|
97.0
|
33.0
|
8.0
|
4.0
|
52.0
|
||||||||||
|
Contractual
obligations of
|
|||||||||||||||
|
discontinued
operations(e)
|
1.0
|
1.0
|
–
|
–
|
–
|
||||||||||
|
(a)
|
Included
all take-or-pay arrangements, capital expenditures, contractual
commitments to purchase equipment that will be leased to others, software
acquisition/license commitments, contractual minimum programming
commitments and any contractually required cash payments for
acquisitions.
|
|
(b)
|
Excluded
funding commitments entered into in the ordinary course of business by our
financial services businesses. Further information on these commitments
and other guarantees is provided in Note 31 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report.
|
|
(c)
|
Included
guaranteed investment contracts, structured settlements and single premium
immediate annuities based on scheduled payouts, as well as those contracts
with reasonably determinable cash flows such as deferred annuities,
universal life, term life, long-term care, whole life and other life
insurance contracts.
|
|
(d)
|
Included
an estimate of future expected funding requirements related to our pension
and postretirement benefit plans and included liabilities for unrecognized
tax benefits. Because their future cash outflows are uncertain, the
following non-current liabilities are excluded from the table above:
deferred taxes, derivatives, deferred revenue and other sundry items. See
Notes 21 and 29 to the consolidated financial statements in Part II, Item
8. “Financial Statements and Supplementary Data” of this Form 10-K Report
for further information on certain of these items.
|
|
(e)
|
Included
payments for other liabilities.
|
Variable
Interest Entities and 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 and as an
alternative source of funding. 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.
Our
securitization activities are conducted using Variable Interest Entities (VIEs),
principally QSPEs. Certain of our VIEs are consolidated because we are
considered to be the primary beneficiary of the entity. Our interests in other
VIEs, including QSPEs and VIEs for which we are not the primary beneficiary, are
accounted for as investment securities, financing receivables or equity method
investments depending on the nature of our involvement. At December 31, 2008,
consolidated variable interest entity assets and liabilities were $26.6 billion
and $21.3 billion, respectively, a decrease of $5.8 billion and $3.1 billion
from 2007, respectively. At December 31, 2008, variable interests in
unconsolidated VIEs other than QSPEs were $2.9 billion, an increase of $1.2
billion from 2007. Our maximum exposure to loss related to such entities at
December 31, 2008, was $4.0 billion, up $1.5 billion from 2007, and includes our
investment in the unconsolidated VIEs and our contractual obligations to fund
new investments by these entities.
(50)
QSPEs
that we use for securitization are funded with asset-backed commercial paper and
term debt. The assets we securitize include: receivables secured by equipment,
commercial real estate, credit card receivables, floorplan inventory
receivables, GE trade receivables and other assets originated and underwritten
by us in the ordinary course of business. At December 31, 2008, off-balance
sheet securitization entities held $52.6 billion in transferred financial
assets, down $3.6 billion from year-end 2007. Assets held by these entities are
of equivalent credit quality to our on-book assets. We monitor the underlying
credit quality in accordance with our role as servicer and apply rigorous
controls to the execution of securitization transactions. With the exception of
credit and liquidity support discussed below, investors in these entities have
recourse only to the underlying assets.
At
December 31, 2008, our Statement of Financial Position included $10.4 billion in
retained interests related to the transferred financial assets discussed above.
These retained interests are held by QSPEs and VIEs for which we are not the
primary beneficiary and take two forms: (1) sellers’ interests, which are
classified as financing receivables, and (2) subordinated interests, designed to
provide credit enhancement to senior interests, which are classified as
investment securities. The carrying value of our retained interests classified
as financing receivables was $4.1 billion at December 31, 2008, down $0.1
billion from 2007. The carrying value of our retained interests classified as
investment securities was $6.3 billion at December 31, 2008, up $0.6 billion
from 2007. Certain of these retained interests are accounted for with changes in
fair value recorded in earnings. During both 2008 and 2007, we recognized
declines in fair value on those retained interests of $0.1 billion. For those
retained interests classified as investment securities, we recognized
other-than-temporary impairments of $0.3 billion in 2008, compared with $0.1
billion in 2007. Our recourse liability in these arrangements was an
inconsequential amount in both 2008 and 2007.
We are
party to various credit enhancement positions with securitization entities,
including liquidity and credit support agreements and guarantee and
reimbursement contracts, and have provided our best estimate of the fair value
of estimated losses on such positions. The estimate of fair value is based on
prevailing market conditions at December 31, 2008. Should market conditions
deteriorate, actual losses could be higher. Our exposure to loss under such
agreements was limited to $2.1 billion at December 31, 2008. Based on our
experience, we believe that, under any plausible future economic scenario, the
likelihood is remote that the financial support arrangement we provide to
securitization entities could have a material adverse effect on our financial
position or results of operations.
We did
not provide support to consolidated VIEs, unconsolidated VIEs or QSPEs beyond
what we are contractually obligated to provide in either 2008 or 2007. We do not
have implicit support arrangements with any VIEs or QSPEs.
The FASB
currently has a project on its agenda that reconsiders the accounting for VIEs
and securitization. While final guidance has not yet been issued, it is likely
that the Board will eliminate the scope exclusion in FASB Interpretation (FIN)
46(R) related to QSPEs, which would result in consolidation of a majority of the
QSPEs we use for securitization. In addition, proposed changes in the criteria
for derecognition of financial assets will significantly reduce the number of
securitizations that qualify for off-balance sheet treatment and gain
recognition. A revised standard is expected to be issued later in 2009 and could
be effective for our 2010 financial statements. Further information about our
securitization activity and our involvement with QSPEs is provided in Note 30 to
the consolidated financial statements in Part II, Item 8. “Financial Statements
and Supplementary Data” of this Form 10-K Report.
Debt
Instruments, Guarantees and Covenants
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. In December 2008,
Standard & Poor’s Ratings Services affirmed our and GE Capital’s “AAA”
long-term and “A-1+” short-term corporate credit ratings but revised its ratings
outlook from stable to negative based partly on the concerns regarding GE
Capital’s future performance and funding in light of capital market turmoil. On
January 24, 2009, Moody’s Investment Services placed the long-term ratings of GE
and GE Capital on review for possible downgrade. The firm’s “Prime-1” short-term
ratings were affirmed. Moody’s said the review for downgrade is based primarily
upon heightened uncertainty regarding GE Capital’s asset quality and earnings
performance in future periods. Various debt instruments, guarantees and
covenants would require posting additional capital or collateral in the event of
a ratings downgrade, but none are triggered if our ratings are reduced to
AA-/Aa3 or A-1+/P-1 or higher. Our objective is to maintain our Triple-A rating,
but we do not anticipate any major operational impacts should that
change.
GE, GECS
and GE Capital have distinct business characteristics that the major debt rating
agencies evaluate both quantitatively and qualitatively.
(51)
Quantitative
measures include:
|
·
|
Earnings
and profitability, revenue growth, the breadth and diversity of sources of
income and return on assets
|
|
·
|
Asset
quality, including delinquency and write-off ratios and reserve
coverage
|
|
·
|
Funding
and liquidity, including cash generated from operating activities,
leverage ratios such as debt-to-capital, retained cash flow to debt,
market access, back-up liquidity from banks and other sources, composition
of total debt and interest coverage
|
|
·
|
Capital
adequacy, including required capital and tangible leverage
ratios
|
Qualitative
measures include:
|
·
|
Franchise
strength, including competitive advantage and market conditions and
position
|
|
·
|
Strength
of management, including experience, corporate governance and strategic
thinking
|
|
·
|
Financial
reporting quality, including clarity, completeness and transparency of all
financial performance
communications
|
GE
Capital’s ratings are supported contractually by a GE commitment to maintain the
ratio of earnings to fixed charges at a specified level as described
below.
Beyond
contractually committed lending agreements, other sources of liquidity include
medium and long-term funding, monetization, asset securitization, cash receipts
from our lending and leasing activities, short-term secured funding on global
assets and potential sales of other assets.
Principal debt conditions are
described below.
The
following conditions relate to GE and GECS:
|
·
|
Swap,
forward and option contracts are required to be executed under standard
master agreements containing mutual downgrade provisions that provide the
ability of the counterparty to require assignment or termination if the
long-term credit rating of the applicable GE entity were to fall below
A–/A3. In certain of these master netting agreements, the counterparty
also has the ability to require assignment or termination if the
short-term rating of the applicable GE entity were to fall below A-1/P-1.
The fair value of our exposure after consideration of netting arrangements
and collateral under the agreements was estimated to be $4.0 billion at
December 31, 2008.
|
|
·
|
If
GE Capital’s ratio of earnings to fixed charges, which was 1.24:1 at the
end of 2008, were to deteriorate to 1.10:1, GE has committed to contribute
capital to GE Capital. GE also guaranteed certain issuances of GECS
subordinated debt having a face amount of $0.8 billion at
December 31, 2008 and 2007.
|
|
·
|
In
connection with certain subordinated debentures for which GECC receives
equity credit by rating agencies, GE has agreed to promptly return to GECC
dividends, distributions or other payments it receives from GECC during
events of default or interest deferral periods under such subordinated
debentures. There were $7.3 billion of such debentures outstanding at
December 31, 2008.
|
The
following conditions relate to consolidated entities:
|
·
|
If
the short-term credit rating of GE Capital or certain consolidated
entities discussed further in Note 30 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report were to be reduced below A–1/P–1, GE
Capital would be required to provide substitute liquidity for those
entities or provide funds to retire the outstanding commercial paper. The
maximum net amount that GE Capital would be required to provide in the
event of such a downgrade is determined by contract, and amounted to $3.8
billion at December 31, 2008.
|
(52)
|
·
|
One
group of consolidated entities holds investment securities funded by the
issuance of GICs. 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 would be required to provide approximately $3.5
billion of capital to such entities as of December 31, 2008, pursuant to
letters of credit issued by GECC. 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. As of December 31, 2008,
the value of these entities’ liabilities was $10.7 billion and the fair
value of their assets was $9.2 billion (which included unrealized losses
on investment securities of $2.1 billion). With respect to these
investment securities, 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
maturity.
|
|
·
|
Another
consolidated entity also issues GICs where proceeds are loaned to GE
Capital. 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 up to approximately $4.7 billion as
of December 31, 2008 to repay holders of
GICs.
|
In our
history, we have never violated any of the above conditions at GE, GECS or GE
Capital.
On
November 12, 2008, the FDIC approved GE Capital’s application for designation as
an eligible entity under the FDIC’s TLGP. Qualifying debt issued by GE Capital
is guaranteed under the Debt Guarantee Program of the FDIC’s TLGP and is backed
by the full faith and credit of the United States. The FDIC’s guarantee under
the TLGP is effective until the earlier of the maturity of the debt or June 30,
2012. The maximum amount of debt that GE Capital is permitted to have
issued and outstanding under the Debt Guarantee Program at any time is
approximately $126 billion. At December 31, 2008, GE Capital had issued and
outstanding, $35.2 billion of senior, unsecured debt that was guaranteed by the
FDIC. GE Capital and GE entered into 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.
Critical
Accounting Estimates
Accounting
estimates and assumptions discussed in this section are those that we consider
to be the most critical to an understanding of our financial statements because
they inherently involve significant judgments and uncertainties. All of these
estimates reflect our best judgment about current, and for some estimates
future, economic and market conditions and their effects based on information
available as of the date of these financial statements. If such conditions
persist longer or deteriorate further than expected, it is reasonably possible
that the judgments and estimates described below could change, which may result
in future impairments of investment securities, goodwill, intangibles and
long-lived assets, incremental losses on financing receivables, establishment of
valuation allowances on deferred tax assets and increased tax liabilities, among
other effects. Also see Note 1, Summary of Significant Accounting Policies, in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report, which discusses the significant accounting policies that we have
selected from acceptable alternatives.
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.
Further
information is provided in the Global Risk Management section and Financial
Resources and Liquidity – Financing Receivables section of this Item, the Asset
impairment section that follows and in Notes 1, 12 and 13 to the consolidated
financial statements in Part II, Item 8. “Financial Statements and Supplementary
Data” of this Form 10-K Report.
(53)
Revenue recognition on long-term
product services agreements requires estimates of profits over the
multiple-year terms of such agreements, considering factors such as the
frequency and extent of future monitoring, maintenance and overhaul events; the
amount of personnel, spare parts and other resources required to perform the
services; and future billing rate and cost changes. We routinely review
estimates under product services agreements and regularly revise them to adjust
for changes in outlook. We also regularly assess customer credit risk inherent
in the carrying amounts of receivables and contract costs and estimated
earnings, including the risk that contractual penalties may not be sufficient to
offset our accumulated investment in the event of customer termination. We gain
insight into future utilization and cost trends, as well as credit risk, through
our knowledge of the installed base of equipment and the close interaction with
our customers that comes with supplying critical services and parts over
extended periods. Revisions that affect a product services agreement’s total
estimated profitability result in an adjustment of earnings; such adjustments
decreased earnings by $0.2 billion in 2008 and increased earnings by $0.4
billion and $0.8 billion in 2007 and 2006, respectively. We provide for probable
losses when they become evident.
Carrying
amounts for product services agreements in progress at both December 31,
2008 and 2007, were $5.5 billion, and are included in the line, “Contract costs
and estimated earnings” in Note 16 to the consolidated financial statements
in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form
10-K Report.
Further
information is provided in Note 1 to the consolidated financial statements in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Asset impairment assessment
involves various estimates and assumptions as follows:
Investments. 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. 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. See Note 28 in Part
II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report, which discusses the determination of fair value of investment
securities.
Further
information about actual and potential impairment losses is provided in the
Financial Resources and Liquidity – Investment Securities section of this Item
and in Notes 1, 9 and 16 to the consolidated financial statements in Part II,
Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Long-Lived Assets. We review
long-lived assets for impairment whenever events or changes in circumstances
indicate that the related carrying amounts may not be recoverable. Determining
whether an impairment has occurred typically requires various estimates and
assumptions, including determining which undiscounted cash flows are directly
related to the potentially impaired asset, the useful life over which cash flows
will occur, their amount, and the asset’s residual value, if any. In turn,
measurement of an impairment loss requires a determination of fair value, which
is based on the best information available. We derive the required undiscounted
cash flow estimates from our historical experience and our internal business
plans. To determine fair value, we use our internal cash flow estimates
discounted at an appropriate interest rate, quoted market prices when available
and independent appraisals, as appropriate.
Commercial
aircraft are a significant concentration of assets in Capital Finance, and are
particularly subject to market fluctuations. Therefore, we test recoverability
of each aircraft in our operating lease portfolio at least annually.
Additionally, we perform quarterly evaluations in circumstances such as when
aircraft are re-leased, current lease terms have changed or a specific lessee’s
credit standing changes. We consider market conditions, such as global demand
for commercial aircraft. Estimates of future rentals and residual values are
based on historical experience and information received routinely from
independent appraisers. Estimated cash flows from future leases are reduced for
expected downtime between leases and for estimated technical costs required to
prepare aircraft to be redeployed. Fair value used to measure impairment is
based on current market values from independent appraisers.
We
recognized impairment losses on our operating lease portfolio of commercial
aircraft of $0.1 billion in both 2008 and 2007. Provisions for losses on
financing receivables related to commercial aircraft were insignificant in 2008
and 2007.
(54)
Further
information on impairment losses and our exposure to the commercial aviation
industry is provided in the Operations – Overview section of this Item and in
Notes 14 and 31 to the consolidated financial statements in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K
Report.
Real Estate. We review our
real estate investment portfolio for impairment routinely or when events or
circumstances indicate that the related carrying amounts may not be recoverable.
The cash flow estimates used for both estimating value and the recoverability
analysis are inherently judgmental, and reflect current and projected lease
profiles, available industry information about expected trends in rental,
occupancy and capitalization rates and expected business plans, which include
our estimated holding period for the asset. Our portfolio is diversified, both
geographically and by asset type. However, the global real estate market is
subject to periodic cycles that can cause significant fluctuations in market
values. At December 31, 2008, the carrying value of our Capital Finance Real
Estate investments exceeded the estimated value by about $4 billion. At December
31, 2007, the estimated value exceeded the carrying value by about $3 billion.
This decline in the estimated value of the portfolio reflected sales of
properties with a book value of $5.8 billion, resulting in pre-tax gains of $1.9
billion, and also reflected deterioration in current and expected real estate
market liquidity and macroeconomic trends throughout the year, resulting in
declining market occupancy rates and market rents as well as increases in our
estimates of market capitalization rates based on historical data. Declines in
estimated value of real estate below carrying value result in impairment losses
when the aggregate undiscounted cash flow estimates used in the estimated value
measurement are below carrying amount. As such, estimated losses in the
portfolio will not necessarily result in recognized impairment losses. When we
recognize an impairment, the impairment is measured based upon the fair value of
the underlying asset which is based upon current market data, including current
capitalization rates. During 2008, Capital Finance Real Estate recognized
pre-tax impairments of $0.3 billion in its real estate held for investment, as
compared to $0.2 billion in 2007. Continued deterioration in economic
conditions or prolonged market illiquidity may result in further impairments
being recognized. Furthermore, significant judgment and uncertainty related to
forecasted valuation trends, especially in illiquid markets, results in inherent
imprecision in real estate value estimates. Further information is provided in
the Global Risk Management section of this Item and in Note 16 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Goodwill and Other Identified
Intangible Assets. We test goodwill for impairment annually and whenever
events or circumstances make it more likely than not that the fair value of a
reporting unit has fallen below its carrying amount, such as a significant
adverse change in the business climate or a decision to sell or dispose all or a
portion of a reporting unit. Determining whether an impairment has occurred
requires valuation of the respective reporting unit, which we estimate using a
discounted cash flow method. For financial services reporting units, these cash
flows are reduced for estimated interest costs. Also, when determining the
amount of goodwill to be allocated to a business disposition for a financial
services business, we reduce the cash proceeds we receive from the sale by the
amount of debt which is allocated to the sold business in order to be consistent
with the reporting unit valuation methodology. When available and as
appropriate, we use comparative market multiples to corroborate discounted cash
flow results. In applying this methodology, we rely on a number of factors,
including actual operating results, future business plans, economic projections
and market data.
If this
analysis indicates goodwill is impaired, measuring the impairment requires a
fair value estimate of each identified tangible and intangible asset. In this
case, we supplement the cash flow approach discussed above with independent
appraisals, as appropriate.
Given
the significant changes in the business climate for financial services and our
stated strategy to reduce our Capital Finance ending net investment, we
re-tested goodwill for impairment at the reporting units within Capital Finance
during the fourth quarter of 2008. In performing this analysis, we revised our
estimated future cash flows and discount rates, as appropriate, to reflect
current market conditions in the financial services industry. In each case, no
impairment was indicated. Reporting units within Capital Finance are CLL, GE
Money, Real Estate, Energy Financial Services and GECAS, which had goodwill
balances at December 31, 2008, of $12.8 billion, $9.1 billion, $1.2 billion,
$2.2 billion and $0.2 billion, respectively.
We
review identified intangible assets with defined useful lives and subject to
amortization for impairment whenever events or changes in circumstances indicate
that the related carrying amounts may not be recoverable. Determining whether an
impairment loss occurred requires comparing the carrying amount to the sum of
undiscounted cash flows expected to be generated by the asset. We test
intangible assets with indefinite lives annually for impairment using a fair
value method such as discounted cash flows. For our insurance activities
remaining in continuing operations, we periodically test for impairment our
deferred acquisition costs and present value of future profits.
(55)
Further
information is provided in the Financial Resources and Liquidity – Goodwill and
Other Intangible Assets section of this Item and in Notes 1 and 15 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Pension assumptions are
significant inputs to the actuarial models that measure pension benefit
obligations and related effects on operations. Two assumptions – discount rate
and expected return on assets – are important elements of plan expense and
asset/liability measurement. We evaluate these critical assumptions at least
annually on a plan and country-specific basis. We periodically evaluate other
assumptions involving demographic factors, such as retirement age, mortality and
turnover, and update them to reflect our experience and expectations for the
future. Actual results in any given year will often differ from actuarial
assumptions because of economic and other factors.
Accumulated
and projected benefit obligations are expressed as the present value of future
cash payments. We discount those cash payments using the weighted average of
market-observed yields for high quality fixed income securities with maturities
that correspond to the payment of benefits. Lower discount rates increase
present values and subsequent-year pension expense; higher discount rates
decrease present values and subsequent-year pension expense.
Our
discount rates for principal pension plans at December 31, 2008, 2007 and
2006 were 6.11%, 6.34% and 5.75%, respectively, reflecting market interest
rates.
To
determine the expected long-term rate of return on pension plan assets, we
consider current and expected asset allocations, as well as historical and
expected returns on various categories of plan assets. In developing future
return expectations for our principal benefit plans’ assets, we evaluate general
market trends as well as key elements of asset class returns such as expected
earnings growth, yields and spreads across a number of potential scenarios.
Assets in our principal pension plans declined 28.2% in 2008, and had average
annual earnings of 3.3%, 4.0% and 10.1% per year in the five-, 10- and 25-year
periods ended December 31, 2008, respectively. In 2007, assets in our principal
pension plans earned 13.6% and had average annual earnings of 14.9%, 9.2% and
12.2% per year in the five-, 10- and 25-year periods ended December 31, 2007,
respectively. Based on our analysis of future expectations of asset performance,
past return results, and our current and expected asset allocations, we have
assumed an 8.5% long-term expected return on those assets.
Sensitivity
to changes in key assumptions for our principal pension plans
follows.
|
·
|
Discount
rate – A 25 basis point increase in discount rate would decrease pension
cost in the following year by $0.2
billion.
|
|
·
|
Expected
return on assets – A 50 basis point decrease in the expected return on
assets would increase pension cost in the following year by $0.3
billion.
|
Further
information on our pension plans is provided in the Operations – Overview
section of this Item and in Note 6 to the consolidated financial statements in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
(56)
Income Taxes. Our annual tax
rate is based on our income, statutory tax rates and tax planning opportunities
available to us in the various jurisdictions in which we operate. Tax laws are
complex and subject to different interpretations by the taxpayer and respective
governmental taxing authorities. Significant judgment is required in determining
our tax expense and in evaluating our tax positions, including evaluating
uncertainties under FIN 48, Accounting for Uncertainty in Income
Taxes. We review our tax positions quarterly and adjust the balances as
new information becomes available. Our income tax rate is significantly affected
by the tax rate on our global operations. In addition to local country tax laws
and regulations, this rate depends on the extent earnings are indefinitely
reinvested outside the United States. Indefinite reinvestment is determined by
management’s judgment about and intentions concerning the future operations of
the company. Deferred income tax assets represent amounts available to reduce
income taxes payable on taxable income in future years. Such assets arise
because of temporary differences between the financial reporting and tax bases
of assets and liabilities, as well as from net operating loss and tax credit
carryforwards. We evaluate the recoverability of these future tax deductions and
credits by assessing the adequacy of future expected taxable income from all
sources, including reversal of taxable temporary differences, forecasted
operating earnings and available tax planning strategies. These sources of
income inherently rely heavily on estimates. We use our historical experience
and our short and long-range business forecasts to provide insight. Further, our
global and diversified business portfolio gives us the opportunity to employ
various prudent and feasible tax planning strategies to facilitate the
recoverability of future deductions. Amounts recorded for deferred tax assets
related to non-U.S. net operating losses, net of valuation allowances, were $1.8
billion and $1.7 billion at December 31, 2008 and 2007, respectively. Such
year-end 2008 amounts are expected to be fully recoverable within the applicable
statutory expiration periods. To the extent we do not consider it more likely
than not that a deferred tax asset will be recovered, a valuation allowance is
established.
Further
information on income taxes is provided in the Operations – Overview section of
this Item and in Notes 7 and 21 to the consolidated financial statements in
Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Derivatives and Hedging. We
use derivatives to manage a variety of risks, including risks related to
interest rates, foreign exchange and commodity prices. Accounting for
derivatives as hedges requires that, at inception and over the term of the
arrangement, the hedged item and related derivative meet the requirements for
hedge accounting. The rules and interpretations related to derivatives
accounting are complex. Failure to apply this complex guidance correctly will
result in all changes in the fair value of the derivative being reported in
earnings, without regard to the offsetting changes in the fair value of the
hedged item.
In
evaluating whether a particular relationship qualifies for hedge accounting, we
test effectiveness at inception and each reporting period thereafter by
determining whether changes in the fair value of the derivative offset, within a
specified range, changes in the fair value of the hedged item. If fair value
changes fail this test, we discontinue applying hedge accounting to that
relationship prospectively. Fair values of both the derivative instrument and
the hedged item are calculated using internal valuation models incorporating
market-based assumptions, subject to third-party confirmation.
At
December 31, 2008, derivative assets and liabilities were $12.6 billion and
$5.2 billion, respectively. Further information about our use of derivatives is
provided in Notes 18, 23 and 29 to the consolidated financial statements in Part
II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K
Report.
Investments measured at fair value in
earnings include retained interests in securitizations accounted for
under SFAS 155, Accounting for
Certain Hybrid Financial Instruments, and equity investments of $2.6
billion at year-end 2008. The earnings effects of changes in fair value on these
assets, favorable and unfavorable, will be reflected in the period in which
those changes occur. As discussed in Note 17 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary Data” of
this Form 10-K Report, we have businesses that are held for sale valued at $2.7
billion at year-end 2008, which represents the estimated fair value less costs
to sell. Those sales are expected to close in the first quarter of 2009. As
discussed in Note 16 to the consolidated financial statements in Part II, Item
8. “Financial Statements and Supplementary Data” of this Form 10-K Report, we
also have assets that are classified as held for sale in the ordinary course of
business, primarily credit card receivables, loans and real estate properties,
carried at $5.0 billion at year-end 2008, which represents the lower of carrying
amount or estimated fair value less costs to sell. To the extent that the
estimated fair value less costs to sell is lower than carrying value, any
favorable or unfavorable changes in fair value will be reflected in earnings in
the period in which such changes occur.
(57)
Other loss contingencies are
recorded as liabilities when it is probable that a liability has been incurred
and the amount of the loss is reasonably estimable. Disclosure is required when
there is a reasonable possibility that the ultimate loss will materially exceed
the recorded provision. Contingent liabilities are often resolved over long time
periods. Estimating probable losses requires analysis of multiple forecasts that
often depend on judgments about potential actions by third parties such as
regulators.
Further
information is provided in Notes 20 and 31 to the consolidated financial
statements in Part II, Item 8. “Financial Statements and Supplementary Data” of
this Form 10-K Report.
Other
Information
New
Accounting Standards
On
September 15, 2006, the FASB issued SFAS 157, Fair Value Measurements,
which defines fair value, establishes a new framework for measuring that value
and expands disclosures about fair value measurements. The standard applied
prospectively to new fair value measurements performed after January 1,
2008, for measurements of the fair values of financial instruments and recurring
fair value measurements of non-financial assets and liabilities; on January 1,
2009, the standard applies to all remaining fair value measurements, including
non-recurring valuations of non-financial assets and liabilities such as those
used in measuring impairments of goodwill, other intangible assets and other
long-lived assets. It also applies to fair value measurements of non-financial
assets acquired and liabilities assumed in business combinations consummated
after January 1, 2009.
On
December 4, 2007, the FASB issued SFAS 141(R), Business Combinations, which
is effective for us on January 1, 2009. This standard will significantly change
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:
|
·
|
In-process
research and development (IPR&D) will be accounted for as an asset,
with the cost recognized as the research and development is realized or
abandoned. IPR&D is presently expensed at the time of the
acquisition.
|
|
·
|
Contingent
consideration will generally be recorded at fair value with subsequent
adjustments recognized in operations. Contingent consideration is
presently accounted for as an adjustment of purchase
price.
|
|
·
|
Decreases
in valuation allowances on acquired deferred tax assets will be recognized
in operations. Such changes previously were considered to be subsequent
changes in consideration and were recorded as decreases in
goodwill.
|
|
·
|
Transaction
costs will generally be expensed. Certain such costs are presently treated
as costs of the acquisition.
|
Generally,
the effects of SFAS 141(R) will depend on future acquisitions. In the fourth quarter
of 2008, we expensed an insignificant amount of direct costs related to business
combinations that were in process, but not completed by the effective date of
SFAS 141(R). In December 2008, the FASB issued FASB Staff Position (FSP)
FAS 141(R)-a, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies, a proposed FSP which would amend the accounting in
SFAS 141(R) for assets and liabilities arising from contingencies in a business
combination. The proposed FSP would require that pre-acquisition contingencies
be recognized at fair value, if fair value can be reasonably determined. If fair
value cannot be reasonably determined, the proposed FSP requires measurement
based on the best estimate in accordance with SFAS 5, Accounting for Contingencies.
Also
on December 4, 2007, the FASB issued SFAS 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No.
51, which is effective for us on January 1, 2009. This standard will
significantly change the accounting and reporting related to noncontrolling
interests in our consolidated financial statements. After adoption,
noncontrolling interests ($8.9 billion and $8.0 billion at December 31, 2008 and
2007, respectively) will be classified as shareowners’ equity, a change from its
current classification between liabilities and shareowners’ equity. Earnings
attributable to minority interests ($0.6 billion in 2008 and $0.9 billion in
both 2007 and 2006) will be included in net earnings, although such earnings
will continue to be deducted to measure earnings per share. Purchases and sales
of minority interests will be reported in equity similar to treasury stock
transactions. Gains on sales of minority interests that would not have been
reported in net earnings under SFAS 160 amounted to $0.4 billion and $0.9
billion in 2008 and 2007, respectively.
(58)
On
December 12, 2007, the FASB ratified Emerging Issues Task Force (EITF) Issue
07-1, Accounting for
Collaborative Arrangements. The consensus provides guidance on
presentation of the financial results of a collaborative arrangement, including
payments between the parties. The consensus requires us to present the results
of the collaborative arrangement in accordance with EITF Issue 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent, and, in the absence of applicable
authoritative literature, to adopt an accounting policy for payments between the
participants that will be consistently applied. The consensus is applied
retrospectively to all collaborative arrangements existing as of January 1, 2009,
and covers arrangements in several of our businesses. Adoption of this standard
will not affect our earnings, cash flows or financial position.
Supplemental
Information
Financial
Measures that Supplement Generally Accepted Accounting Principles
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 U.S. Securities and Exchange
Commission rules. Specifically, we have referred, in various sections of this
Annual Report, to:
|
·
|
Average
organic revenue growth for the three years ended December 31,
2008
|
|
·
|
Average
total shareowners’ equity, excluding effects of discontinued
operations
|
|
·
|
Ratio
of debt to equity at GE Capital, net of cash and equivalents and with
classification of hybrid debt as
equity
|
|
·
|
GE
pre-tax earnings from continuing operations before income taxes, excluding
GECS earnings from continuing operations, the corresponding effective tax
rates and the reconciliation of the U.S. federal statutory rate to those
effective tax rates for the three years ended December 31,
2008
|
|
·
|
Delinquency
rates on managed equipment financing loans and leases and managed consumer
financing receivables for 2008, 2007 and
2006
|
The
reasons we use these non-GAAP financial measures and the reconciliations to
their most directly comparable GAAP financial measures follow.
Organic
Revenue Growth in 2008
|
(In
millions)
|
2008
|
2007
|
%
change
|
||||||
|
GE
consolidated revenues as reported
|
$
|
182,515
|
$
|
172,488
|
|||||
|
Less
the effects of
|
|||||||||
|
Acquisitions,
business dispositions (other than dispositions
|
|||||||||
|
of
businesses acquired for investment) and currency
|
|||||||||
|
exchange
rates
|
10,139
|
2,992
|
|||||||
|
The
2008 Olympics broadcasts
|
1,020
|
–
|
|||||||
|
GE
consolidated revenues excluding the effects of
|
|||||||||
|
acquisitions,
business dispositions (other than dispositions
|
|||||||||
|
of
businesses acquired for investment), currency exchange
|
|||||||||
|
rates
and the 2008 Olympics broadcasts (organic revenues)
|
$
|
171,356
|
$
|
169,496
|
1
|
%
|
|||
(59)
Organic
Revenue Growth in 2007
|
(In
millions)
|
2007
|
2006
|
%
change
|
||||||
|
GE
consolidated revenues as reported
|
$
|
172,488
|
$
|
151,568
|
|||||
|
Less
the effects of
|
|||||||||
|
Acquisitions,
business dispositions (other than dispositions
|
|||||||||
|
of
businesses acquired for investment) and currency
|
|||||||||
|
exchange
rates
|
12,803
|
4,992
|
|||||||
|
The
2006 Olympics broadcasts
|
–
|
684
|
|||||||
|
Reclassification
of discontinued operations
|
(250
|
)
|
(275
|
)
|
|||||
|
GE
consolidated revenues excluding the effects of
|
|||||||||
|
acquisitions,
business dispositions (other than dispositions
|
|||||||||
|
of
businesses acquired for investment), currency exchange
|
|||||||||
|
rates,
the 2006 Olympics broadcasts and reclassifications
|
|||||||||
|
of
discontinued operations (organic revenues)
|
$
|
159,935
|
$
|
146,167
|
9
|
%
|
|||
Organic
Revenue Growth in 2006
|
(In
millions)
|
2006
|
2005
|
%
change
|
||||||
|
GE
consolidated revenues as reported
|
$
|
151,568
|
$
|
136,262
|
|||||
|
Less
the effects of
|
|||||||||
|
Acquisitions,
business dispositions (other than dispositions
|
|||||||||
|
of
businesses acquired for investment) and currency
|
|||||||||
|
exchange
rates
|
5,213
|
2,750
|
|||||||
|
The
2006 Olympics broadcasts
|
684
|
–
|
|||||||
|
Restatement
and immaterial adjustments
|
(219
|
)
|
398
|
||||||
|
Reclassifications
of discontinued operations
|
(11,407
|
)
|
(11,552
|
)
|
|||||
|
GE
consolidated revenues excluding the effects of
acquisitions,
|
|||||||||
|
business
dispositions (other than dispositions of businesses
|
|||||||||
|
acquired
for investment), currency exchange rates,
|
|||||||||
|
the
2006 Olympics broadcasts, restatement and immaterial
|
|||||||||
|
adjustments
and reclassifications of discontinued operations
|
|||||||||
|
(organic
revenues)
|
$
|
157,297
|
$
|
144,666
|
9
|
%
|
|||
|
Three-year
average
|
6
|
%
|
|||||||
Organic
revenue growth measures revenue excluding the effects of acquisitions, business
dispositions and currency exchange rates, and without the effects of the 2008
and 2006 Olympics broadcasts, the restatement and immaterial adjustments and
reclassifications of discontinued operations. We believe that this measure
provides management and investors with a more complete understanding of
underlying operating results and trends of established, ongoing operations by
excluding the effect of acquisitions, dispositions and currency exchange, which
activities are subject to volatility and can obscure underlying trends, and the
2008 and 2006 Olympics broadcasts, the restatement and immaterial adjustments
and reclassification of discontinued operations, which if included would
overshadow trends in ongoing revenues. Management recognizes that the term
“organic revenue growth” may be interpreted differently by other companies and
under different circumstances. Although this may have an effect on comparability
of absolute percentage growth from company to company, we believe that these
measures are useful in assessing trends of the respective businesses or
companies and may therefore be a useful tool in assessing period-to-period
performance trends.
(60)
Average
Total Shareowners’ Equity, Excluding Effects of Discontinued Operations(a)
|
December
31 (In millions)
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||
|
Average total shareowners’
equity(b)
|
$
|
113,387
|
$
|
113,842
|
$
|
109,174
|
$
|
110,998
|
$
|
94,521
|
|||||
|
Less
the effects of
|
|||||||||||||||
|
Cumulative
earnings from discontinued operations
|
–
|
–
|
–
|
2,094
|
2,985
|
||||||||||
|
Average
net investment in discontinued operations
|
(590
|
)
|
3,640
|
11,658
|
13,298
|
8,743
|
|||||||||
|
Average
total shareowners’ equity, excluding effects of
|
|||||||||||||||
|
discontinued
operations(a)
|
$
|
113,977
|
$
|
110,202
|
$
|
97,516
|
$
|
95,606
|
$
|
82,793
|
|||||
|
(a)
|
Used
for computing return on average shareowners’ equity and return on average
total capital invested shown in the Selected Financial Data section in
Part II, Item 6. “Selected Financial Data.”
|
|
(b)
|
On
an annual basis, calculated using a five-point
average.
|
Our ROTC
calculation excludes earnings (losses) of discontinued operations from the
numerator because U.S. GAAP requires us to display those earnings (losses) in
the Statement of Earnings. We exclude the cumulative effect of earnings (losses)
of discontinued operations from the denominator in our ROTC calculation (1) for
each of the periods for which related discontinued operations were presented,
and (2) for our average net investment in discontinued operations since July 1,
2005. Had we disposed of these operations before July 1, 2005, we would have
applied the proceeds to reduce parent-supported debt at GE Capital. However,
since parent-supported debt at GE Capital was retired by June 30, 2005, we have
assumed that we would have distributed the proceeds after that time to
shareowners through share repurchases, thus reducing average total shareowners’
equity. Our calculation of average total shareowners’ equity may not be directly
comparable to similarly titled measures reported by other companies. We believe
that it is a clearer way to measure the ongoing trend in return on total capital
for the continuing operations of our businesses given the extent that
discontinued operations have affected our reported results. We believe that this
results in a more relevant measure for management and investors to evaluate
performance of our continuing operations, on a consistent basis, and to evaluate
and compare the performance of our continuing operations with the ongoing
operations of other businesses and companies.
Definitions
indicating how the above-named ratios are calculated using average total
shareowners’ equity, excluding effects of discontinued operations, can be found
in the Glossary.
Ratio
of Debt to Equity at GE Capital, Net of Cash and Equivalents and with
Classification of Hybrid Debt as Equity
|
December
31 (Dollars in millions)
|
2008
|
|||||
|
GE
Capital debt
|
$
|
510,356
|
||||
|
Less
cash and equivalents
|
(36,430
|
)
|
||||
|
Less
hybrid debt
|
(7,725
|
)
|
||||
|
$
|
466,201
|
|||||
|
GE
Capital equity
|
$
|
58,229
|
||||
|
Plus
hybrid debt
|
7,725
|
|||||
|
$
|
65,954
|
|||||
|
Ratio
|
7.07:1
|
(61)
We have provided the GE Capital ratio of debt to equity on a basis that reflects the use of cash and equivalents to reduce debt, and with long-term debt due in 2066 and 2067 classified as equity. We believe this is a useful comparison to a GAAP-based ratio of debt to equity because cash balances may be used to reduce debt and because this long-term debt has equity-like characteristics. The usefulness of this supplemental measure may be limited, however, as the total amount of cash and equivalents at any point in time may be different than the amount that could practically be applied to reduce outstanding debt, and it may not be advantageous or practical to replace debt that does not mature for more than 50 years with equity. Also, in February 2009, the GE Board authorized a capital contribution of up to $9.5 billion to GE Capital, which is expected to be made in the first quarter of 2009. The effect of this capital contribution on GE Capital equity is not reflected in the ratio above. Despite these potential limitations, we believe that this measure, considered along with the corresponding GAAP measure, provides investors with additional information that may be more comparable to other financial institutions and businesses.
GE
Income Tax Rate, Excluding GECS Earnings
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
earnings from continuing operations before income taxes
|
$
|
21,516
|
$
|
25,251
|
$
|
21,896
|
|||
|
Less
GECS earnings from continuing operations
|
7,774
|
12,417
|
10,219
|
||||||
|
Total
|
$
|
13,742
|
$
|
12,834
|
$
|
11,677
|
|||
|
GE
provision for income taxes
|
$
|
3,427
|
$
|
2,794
|
$
|
2,552
|
|||
|
GE
effective tax rate, excluding GECS earnings
|
24.9
|
%
|
21.8
|
%
|
21.9
|
%
|
Reconciliation
of U.S. Federal Statutory Income Tax Rate to GE Income Tax Rate, Excluding GECS
Earnings
|
2008
|
2007
|
2006
|
|||||||
|
U.S.
federal statutory income tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
|||
|
Reduction
in rate resulting from
|
|||||||||
|
Tax
on global activities including exports
|
(8.2
|
)
|
(9.9
|
)
|
(12.2
|
)
|
|||
|
U.S.
business credits
|
(0.6
|
)
|
(0.6
|
)
|
(0.7
|
)
|
|||
|
All
other – net
|
(1.3
|
)
|
(2.7
|
)
|
(0.2
|
)
|
|||
|
(10.1
|
)
|
(13.2
|
)
|
(13.1
|
)
|
||||
|
GE
income tax rate, excluding GECS earnings
|
24.9
|
%
|
21.8
|
%
|
21.9
|
%
|
We
believe that the GE effective tax rate is best analyzed in relation to GE
earnings before income taxes excluding the GECS net earnings from continuing
operations, as GE tax expense does not include taxes on GECS earnings.
Management believes that in addition to the Consolidated and GECS tax rates
shown in Note 7 to the consolidated financial statements in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K Report, this
supplemental measure provides investors with useful information as it presents
the GE effective tax rate that can be used in comparing the GE results to other
non-financial services businesses.
Delinquency
Rates on Certain Financing Receivables
Delinquency
rates on managed equipment financing loans and leases and managed consumer
financing receivables follow.
Equipment
Financing
|
December
31
|
2008
|
2007
|
2006
|
||||||
|
Managed
|
2.17
|
%
|
1.21
|
%
|
1.22
|
%
|
|||
|
Off-book
|
1.20
|
0.71
|
0.52
|
||||||
|
On-book
|
2.34
|
1.33
|
1.42
|
(62)
Consumer
|
December
31
|
2008
|
2007
|
2006
|
||||||
|
Managed
|
7.47
|
%
|
5.38
|
%
|
5.22
|
%
|
|||
|
U.S.
|
7.14
|
5.52
|
4.93
|
||||||
|
Non-U.S.
|
7.64
|
5.32
|
5.34
|
||||||
|
Off-book
|
8.24
|
6.64
|
5.49
|
||||||
|
U.S.
|
8.24
|
6.64
|
5.49
|
||||||
|
Non-U.S.
|
(a)
|
(a)
|
(a)
|
||||||
|
On-book
|
7.35
|
5.22
|
5.20
|
||||||
|
U.S.
|
6.39
|
4.78
|
4.70
|
||||||
|
Non-U.S.
|
7.64
|
5.32
|
5.34
|
||||||
|
(a)
|
Not
applicable.
|
Delinquency
rates on on-book and off-book equipment financing loans and leases increased
from December 31, 2007 to December 31, 2008, as a result of continuing weakness
in the economic and credit environment. In addition, delinquency rates on
on-book equipment financing loans and leases increased from December 31, 2007 to
December 31, 2008, as a result of the inclusion of the CitiCapital acquisition
and Sanyo acquisition in Japan, which contributed an additional 12 and 9 basis
points, respectively, at December 31, 2008.
The
increases in off-book and on-book delinquencies for consumer financing
receivables in the U.S. from December 31, 2007 to December 31, 2008, reflect the
continued rise in delinquencies across the U.S. credit card receivables
platforms. The increase in on-book delinquencies for consumer financing
receivables outside of the U.S. reflects the effects of the declining U.K.
housing market. The increase in off-book delinquencies for consumer financing
receivables in the U.S. from December 31, 2006 to December 31, 2007, reflected
both a change in the mix of the receivables securitized during 2007 – for
example, our Care Credit receivables which generally have a higher delinquency
rate than our core private label card portfolio – as well as the risk in the
delinquencies across the broader portfolio of U.S. credit card
receivables.
We
believe that delinquency rates on managed financing receivables provide a useful
perspective of our portfolio quality and are key indicators of financial
performance. We use this non-GAAP financial measure because it provides
information that enables management and investors to understand the underlying
operational performance and trends of certain financing receivables and
facilitates a comparison with the performance of our competitors. The same
underwriting standards and ongoing risk monitoring are used for both on-book and
off-book portfolios as the customer’s credit performance will affect both loans
retained on the Statement of Financial Position and securitized loans. We
believe that managed basis information is useful to management and investors,
enabling them to understand both the credit risks associated with the loans
reported on the Statement of Financial Position and our retained interests in
securitized loans.
(63)
Glossary
Backlog Unfilled customer
orders for products and product services (12 months for product
services).
Borrowing Financial liability
(short or long-term) that obligates us to repay cash or another financial asset
to another entity.
Borrowings as a percentage of total
capital invested For GE, the sum of borrowings and mandatorily redeemable
preferred stock, divided by the sum of borrowings, mandatorily redeemable
preferred stock, minority interest and total shareowners’ equity.
Cash equivalents Highly liquid
debt instruments with original maturities of three months or less, such as
commercial paper. Typically included with cash for reporting purposes, unless
designated as available-for-sale and included with investment
securities.
Cash flow hedges Qualifying
derivative instruments that we use to protect ourselves against exposure to
variability in future cash flows. The exposure may be associated with an
existing asset or liability, or with a forecasted transaction. See
“Hedge.”
Commercial paper Unsecured,
unregistered promise to repay borrowed funds in a specified period ranging from
overnight to 270 days.
Derivative instrument A
financial instrument or contract with another party (counterparty) that is
designed to meet any of a variety of risk management objectives, including those
related to fluctuations in interest rates, currency exchange rates or commodity
prices. Options, forwards and swaps are the most common derivative instruments
we employ. See “Hedge.”
Discontinued operations
Certain businesses we have sold or committed to sell within the next year and
therefore will no longer be part of our ongoing operations. The net earnings,
assets and liabilities, and cash flows of such businesses are separately
classified on our Statement of Earnings, Statement of Financial Position and
Statement of Cash Flows, respectively, for all periods presented.
Effective tax rate Provision
for income taxes as a percentage of earnings from continuing operations before
income taxes and accounting changes. Does not represent cash paid for income
taxes in the current accounting period. Also referred to as “actual tax rate” or
“tax rate.”
Equipment leased to others
Rental equipment we own that is available to rent and is stated at cost less
accumulated depreciation.
Fair value hedge Qualifying
derivative instruments that we use to reduce the risk of changes in the fair
value of assets, liabilities or certain types of firm commitments. Changes in
the fair values of derivative instruments that are designated and effective as
fair value hedges are recorded in earnings, but are offset by corresponding
changes in the fair values of the hedged items. See “Hedge.”
Financing receivables
Investment in contractual loans and leases due from customers (not investment
securities).
Forward contract Fixed price
contract for purchase or sale of a specified quantity of a commodity, security,
currency or other financial instrument with delivery and settlement at a
specified future date. Commonly used as a hedging tool. See
“Hedge.”
Goodwill The premium paid for
acquisition of a business. Calculated as the purchase price less the fair value
of net assets acquired (net assets are identified tangible and intangible
assets, less liabilities assumed).
Guaranteed investment contracts
(GICs) Deposit-type products that guarantee a minimum rate of return,
which may be fixed or floating.
Hedge A technique designed to
eliminate risk. Often refers to the use of derivative financial instruments to
offset changes in interest rates, currency exchange rates or commodity prices,
although many business positions are “naturally hedged” – for example, funding a
U.S. fixed-rate investment with U.S. fixed-rate borrowings is a natural interest
rate hedge.
(64)
Intangible asset A
non-financial asset lacking physical substance, such as goodwill, patents,
licenses, trademarks and customer relationships.
Interest rate swap Agreement
under which two counterparties agree to exchange one type of interest rate cash
flow for another. In a typical arrangement, one party periodically will pay a
fixed amount of interest, in exchange for which that party will receive variable
payments computed using a published index. See “Hedge.”
Investment securities
Generally, an instrument that provides an ownership position in a corporation (a
stock), a creditor relationship with a corporation or governmental body (a
bond), rights to contractual cash flows backed by pools of financial assets or
rights to ownership such as those represented by options, subscription rights
and subscription warrants.
Managed receivables Total
receivable amounts on which we continue to perform billing and collection
activities, including receivables that have been sold with and without credit
recourse and are no longer reported on our Statement of Financial
Position.
Match funding A risk control
policy that provides funding for a particular financial asset having the same
currency, maturity and interest rate characteristics as that asset. Match
funding is executed directly, by issuing debt, or synthetically, through a
combination of debt and derivative financial instruments. For example, when we
lend at a fixed interest rate in the U.S., we can borrow those U.S. dollars
either at a fixed rate of interest or at a floating rate executed concurrently
with a pay-fixed interest rate swap. See “Hedge.”
Monetization Sale of financial
assets to a third party for cash. For example, we sell certain loans, credit
card receivables and trade receivables to third-party financial buyers,
typically providing at least some credit protection and often agreeing to
provide collection and processing services for a fee. Monetization normally
results in gains on interest-bearing assets and losses on non-interest bearing
assets. See “Securitization” and “Variable Interest Entity.”
Operating profit GE earnings
from continuing operations before interest and other financial charges, income
taxes and effects of accounting changes.
Option The right, not the
obligation, to execute a transaction at a designated price, generally involving
equity interests, interest rates, currencies or commodities. See
“Hedge.”
Premium Rate that is charged
under insurance/reinsurance contracts.
Product services For purposes
of the financial statement display of sales and costs of sales in our Statement
of Earnings, “goods” is required by U.S. Securities and Exchange Commission
regulations to include all sales of tangible products, and “services” must
include all other sales, including broadcasting and other services activities.
In our Management’s Discussion and Analysis of Operations we refer to sales of
both spare parts (goods) and related services as sales of “product services,”
which is an important part of our operations.
Product services agreements
Contractual commitments, with multiple-year terms, to provide specified services
for products in our Energy Infrastructure and Technology Infrastructure
installed base – for example, monitoring, maintenance, service and spare parts
for a gas turbine/generator set installed in a customer’s power
plant.
Productivity The rate of
increased output for a given level of input, with both output and input measured
in constant currency.
Progress collections Payments
received from customers as deposits before the associated work is performed or
product is delivered.
Qualifying SPEs (QSPEs) These
entities are a specific type of Variable Interest Entity defined in SFAS 140,
Transfers of Financial Assets
to a Qualifying Special Purpose Entity. The activities of a QSPE are
significantly limited and entirely specified in the legal documents that
established the entity. There also are significant limitations on the types of
assets and derivative instruments they may hold and the types and extent of
activities and decision-making they may engage in.
Reinsurance A form of
insurance that insurance companies buy for their own protection.
(65)
Retained interest A portion of
a transferred financial asset retained by the transferor that provides rights to
receive portions of the cash inflows from that asset.
Return on average shareowners’
equity Earnings from continuing operations before accounting changes
divided by average total shareowners’ equity, excluding effects of discontinued
operations (on an annual basis, calculated using a five-point average). Average
total shareowners’ equity, excluding effects of discontinued operations, as of
the end of each of the years in the five-year period ended December 31, 2008, is
described in the Supplemental Information section.
Return on average total capital
invested For GE, earnings from continuing operations before accounting
changes plus the sum of after-tax interest and other financial charges and
minority interest, divided by the sum of the averages of total shareowners’
equity (excluding effects of discontinued operations), borrowings, mandatorily
redeemable preferred stock and minority interest (on an annual basis, calculated
using a five-point average). Average total shareowners’ equity, excluding
effects of discontinued operations as of the end of each of the years in the
five-year period ended December 31, 2008, is described in the Supplemental
Information section.
Securitization A process
whereby loans or other receivables are packaged, underwritten and sold to
investors. In a typical transaction, assets are sold to a special purpose
entity, which purchases the assets with cash raised through issuance of
beneficial interests (usually debt instruments) to third-party investors.
Whether or not credit risk associated with the securitized assets is retained by
the seller depends on the structure of the securitization. See “Monetization”
and “Variable interest entity.”
Subprime For purposes of GE
Money related discussion, subprime includes credit card, installment and
revolving loans to U.S. borrowers whose credit score is less than 660 based upon
GE Capital’s proprietary scoring models, which add various qualitative and other
factors to the base FICO credit score. FICO credit scores are a widely accepted
rating of individual consumer creditworthiness.
Turnover Broadly based on the
number of times that working capital is replaced during a year. Current
receivables turnover is total sales divided by the five-point average balance of
GE current receivables. Inventory turnover is total sales divided by a
five-point average balance of inventories. See “Working capital.”
Unpaid claims and claims adjustment
expenses Claims reserves for events that have occurred, including both
reported and incurred-but-not-reported (IBNR) reserves, and the expenses of
settling such claims.
Variable interest entity
Entity defined by Financial Accounting Standards Board Interpretation 46
(Revised), and that must be consolidated by its primary beneficiary. A variable
interest entity has one or both of the following characteristics: (1) its equity
at risk is not sufficient to permit the entity to finance its activities without
additional subordinated financial support from other parties, or (2) as a group,
the equity investors lack one or more of the following characteristics: (a)
direct/indirect ability to make decisions, (b) obligation to absorb expected
losses, or (c) right to receive expected residual returns.
Working capital Represents GE
current receivables and inventories, less GE accounts payable and progress
collections.
(66)
Information
about our global risk management can be found in the Operations – Global Risk
Management and Financial Resources and Liquidity – Exchange Rate and Interest
Rate Risks sections in Part II, Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” of this Form 10-K
Report.
Item
8. Financial Statements and Supplementary Data.
Management’s
Annual Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. With our participation, an evaluation of
the effectiveness of our internal control over financial reporting was conducted
as of December 31, 2008, based on the framework and criteria established in
Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Based on
this evaluation, our management has concluded that our internal control over
financial reporting was effective as of December 31, 2008.
Our
independent registered public accounting firm has issued an audit report on our
internal control over financial reporting. Their report follows.
|
/s/
Jeffrey R. Immelt
|
/s/
Keith S. Sherin
|
|
|
Jeffrey
R. Immelt
|
Keith
S. Sherin
|
|
|
Chairman
of the Board and
Chief
Executive Officer
February
6, 2009
|
Vice
Chairman and
Chief
Financial Officer
|
Report
of Independent Registered Public Accounting Firm
To
Shareowners and Board of Directors of General Electric Company:
We have
audited the accompanying statement of financial position of General Electric
Company and consolidated affiliates (“GE”) as of December 31, 2008 and 2007, and
the related statements of earnings, changes in shareowners’ equity and cash
flows for each of the years in the three-year period ended December 31, 2008. We
also have audited GE’s internal control over financial reporting as of December
31, 2008, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). GE management is responsible for these
consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on these consolidated financial statements and an opinion on GE’s
internal control over financial reporting based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
(67)
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, the consolidated financial statements appearing on pages 69, 71, 72,
74, 76-141 and the Summary of Operating Segments table on page 29 present
fairly, in all material respects, the financial position of GE as of December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 2008, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, GE
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated
Framework issued by COSO.
As
discussed in Note 1 to the consolidated financial statements, GE, in 2008,
changed its method of accounting for fair value measurements and adopted the
fair value option for certain financial assets and financial liabilities, in
2007, changed its methods of accounting for uncertainty in income taxes and for
a change or projected change in the timing of cash flows relating to income
taxes generated by leveraged lease transactions, and, in 2006, changed its
methods of accounting for pension and other postretirement benefits and for
share-based compensation.
Our
audits of GE’s consolidated financial statements were made for the purpose of
forming an opinion on the consolidated financial statements taken as a whole.
The accompanying consolidating information appearing on pages 70, 73 and 75 is
presented for purposes of additional analysis of the consolidated financial
statements rather than to present the financial position, results of operations
and cash flows of the individual entities. The consolidating information has
been subjected to the auditing procedures applied in the audits of the
consolidated financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated financial statements taken as
a whole.
|
/s/
KPMG LLP
|
|
|
KPMG
LLP
|
|
|
Stamford,
Connecticut
|
|
|
February
6, 2009
|
(68)
|
General
Electric Company
and
consolidated affiliates
|
|||||||||
|
For
the years ended December 31 (In millions; per-share amounts in
dollars)
|
2008
|
2007
|
2006
|
||||||
|
Revenues
|
|||||||||
|
Sales
of goods
|
$
|
69,100
|
$
|
60,670
|
$
|
55,181
|
|||
|
Sales
of services
|
43,669
|
38,856
|
36,329
|
||||||
|
Other
income (Note 3)
|
1,586
|
3,019
|
2,154
|
||||||
|
GECS
earnings from continuing operations
|
–
|
–
|
–
|
||||||
|
GECS
revenues from services (Note 4)
|
68,160
|
69,943
|
57,904
|
||||||
|
Total
revenues
|
182,515
|
172,488
|
151,568
|
||||||
|
Costs and expenses (Note
5)
|
|||||||||
|
Cost
of goods sold
|
54,602
|
47,309
|
43,279
|
||||||
|
Cost
of services sold
|
29,170
|
25,816
|
23,494
|
||||||
|
Interest
and other financial charges
|
26,209
|
23,762
|
18,879
|
||||||
|
Investment
contracts, insurance losses and insurance
|
|||||||||
|
annuity
benefits
|
3,213
|
3,469
|
3,213
|
||||||
|
Provision
for losses on financing receivables (Note 13)
|
7,518
|
4,431
|
3,062
|
||||||
|
Other
costs and expenses
|
42,021
|
40,173
|
35,491
|
||||||
|
Minority
interest in net earnings of consolidated affiliates
|
641
|
916
|
862
|
||||||
|
Total
costs and expenses
|
163,374
|
145,876
|
128,280
|
||||||
|
Earnings
from continuing operations
|
|||||||||
|
before
income taxes
|
19,141
|
26,612
|
23,288
|
||||||
|
Provision
for income taxes (Note 7)
|
(1,052
|
)
|
(4,155
|
)
|
(3,944
|
)
|
|||
|
Earnings
from continuing operations
|
18,089
|
22,457
|
19,344
|
||||||
|
Earnings
(loss) from discontinued operations, net of taxes (Note 2)
|
(679
|
)
|
(249
|
)
|
1,398
|
||||
|
Net
earnings
|
17,410
|
22,208
|
20,742
|
||||||
|
Preferred
stock dividends declared
|
(75
|
)
|
–
|
–
|
|||||
|
Net
earnings attributable to common shareowners
|
$
|
17,335
|
$
|
22,208
|
$
|
20,742
|
|||
|
Per-share
amounts (Note 8)
|
|||||||||
|
Earnings
from continuing operations
|
|||||||||
|
Diluted
earnings per share
|
$
|
1.78
|
$
|
2.20
|
$
|
1.86
|
|||
|
Basic
earnings per share
|
$
|
1.79
|
$
|
2.21
|
$
|
1.87
|
|||
|
Net
earnings
|
|||||||||
|
Diluted
earnings per share
|
$
|
1.72
|
$
|
2.17
|
$
|
2.00
|
|||
|
Basic
earnings per share
|
$
|
1.72
|
$
|
2.18
|
$
|
2.00
|
|||
|
Dividends
declared per common share
|
$
|
1.24
|
$
|
1.15
|
$
|
1.03
|
|||
See
accompanying notes.
(69)
|
GE
|
GECS
|
|||||||||||||||||
|
For
the years ended December 31
(In
millions; per-share amounts in dollars)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||
|
Revenues
|
||||||||||||||||||
|
Sales
of goods
|
$
|
67,637
|
$
|
60,374
|
$
|
53,221
|
$
|
1,773
|
$
|
718
|
$
|
2,384
|
||||||
|
Sales
of services
|
44,377
|
39,422
|
36,698
|
–
|
–
|
–
|
||||||||||||
|
Other
income (Note 3)
|
1,965
|
3,371
|
2,307
|
–
|
–
|
–
|
||||||||||||
|
GECS
earnings from continuing operations
|
7,774
|
12,417
|
10,219
|
–
|
–
|
–
|
||||||||||||
|
GECS
revenues from services (Note 4)
|
–
|
–
|
–
|
69,514
|
71,218
|
58,967
|
||||||||||||
|
Total
revenues
|
121,753
|
115,584
|
102,445
|
71,287
|
71,936
|
61,351
|
||||||||||||
|
Costs and expenses (Note
5)
|
||||||||||||||||||
|
Cost
of goods sold
|
53,395
|
47,103
|
41,501
|
1,517
|
628
|
2,204
|
||||||||||||
|
Cost
of services sold
|
29,878
|
26,382
|
23,863
|
–
|
–
|
–
|
||||||||||||
|
Interest
and other financial charges
|
2,153
|
1,993
|
1,668
|
25,116
|
22,706
|
17,840
|
||||||||||||
|
Investment
contracts, insurance losses and insurance
|
||||||||||||||||||
|
annuity
benefits
|
–
|
–
|
–
|
3,421
|
3,647
|
3,419
|
||||||||||||
|
Provision
for losses on financing receivables (Note 13)
|
–
|
–
|
–
|
7,518
|
4,431
|
3,062
|
||||||||||||
|
Other
costs and expenses
|
14,401
|
14,148
|
12,893
|
28,085
|
26,537
|
22,977
|
||||||||||||
|
Minority
interest in net earnings of consolidated
|
||||||||||||||||||
|
affiliates
|
410
|
707
|
624
|
231
|
209
|
238
|
||||||||||||
|
Total
costs and expenses
|
100,237
|
90,333
|
80,549
|
65,888
|
58,158
|
49,740
|
||||||||||||
|
Earnings
from continuing operations
|
||||||||||||||||||
|
before
income taxes
|
21,516
|
25,251
|
21,896
|
5,399
|
13,778
|
11,611
|
||||||||||||
|
Provision
for income taxes (Note 7)
|
(3,427
|
)
|
(2,794
|
)
|
(2,552
|
)
|
2,375
|
(1,361
|
)
|
(1,392
|
)
|
|||||||
|
Earnings
from continuing operations
|
18,089
|
22,457
|
19,344
|
7,774
|
12,417
|
10,219
|
||||||||||||
|
Earnings
(loss) from discontinued operations,
|
||||||||||||||||||
|
net
of taxes (Note 2)
|
(679
|
)
|
(249
|
)
|
1,398
|
(719
|
)
|
(2,116
|
)
|
439
|
||||||||
|
Net
earnings
|
17,410
|
22,208
|
20,742
|
7,055
|
10,301
|
10,658
|
||||||||||||
|
Preferred
stock dividends declared
|
(75
|
)
|
–
|
–
|
–
|
–
|
–
|
|||||||||||
|
Net
earnings attributable to common shareowners
|
$
|
17,335
|
$
|
22,208
|
$
|
20,742
|
$
|
7,055
|
$
|
10,301
|
$
|
10,658
|
||||||
|
In
the consolidating data on this page, “GE” means the basis of consolidation
as described in Note 1 to the consolidated financial statements; “GECS”
means General Electric Capital Services, Inc. and all of its affiliates
and associated companies. Separate information is shown for “GE” and
“Financial Services (GECS).” Transactions between GE and GECS have been
eliminated from the “General Electric Company and consolidated affiliates”
columns on the prior page.
|
(70)
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Changes in shareowners’
equity (Note 23)
|
|||||||||
|
Balance
at January 1
|
$
|
115,559
|
$
|
111,509
|
$
|
108,633
|
|||
|
Dividends
and other transactions with shareowners
|
1,873
|
(23,102
|
)
|
(17,983
|
)
|
||||
|
Other
comprehensive income
|
|||||||||
|
Investment
securities – net
|
(3,218
|
)
|
(1,484
|
)
|
(223
|
)
|
|||
|
Currency
translation adjustments – net
|
(11,007
|
)
|
4,527
|
3,649
|
|||||
|
Cash
flow hedges – net
|
(2,664
|
)
|
(539
|
)
|
223
|
||||
|
Benefit
plans – net
|
(13,288
|
)
|
2,566
|
287
|
|||||
|
Total
other comprehensive income
|
(30,177
|
)
|
5,070
|
3,936
|
|||||
|
Increases
attributable to net earnings
|
17,410
|
22,208
|
20,742
|
||||||
|
Comprehensive
income
|
(12,767
|
)
|
27,278
|
24,678
|
|||||
|
Cumulative
effect of changes in accounting principles
|
–
|
(126
|
)
|
(3,819
|
)
|
||||
|
Balance
at December 31
|
$
|
104,665
|
$
|
115,559
|
$
|
111,509
|
|||
See
accompanying notes.
(71)
|
General
Electric Company
and
consolidated affiliates
|
||||||
|
At
December 31 (In millions, except share amounts)
|
2008
|
2007
|
||||
|
Assets
|
||||||
|
Cash
and equivalents
|
$
|
48,187
|
$
|
15,731
|
||
|
Investment
securities (Note 9)
|
41,446
|
45,276
|
||||
|
Current
receivables (Note 10)
|
21,411
|
22,259
|
||||
|
Inventories
(Note 11)
|
13,674
|
12,897
|
||||
|
Financing
receivables – net (Notes 12 and 13)
|
365,168
|
376,123
|
||||
|
Other
GECS receivables
|
13,439
|
16,514
|
||||
|
Property,
plant and equipment – net (Note 14)
|
78,530
|
77,888
|
||||
|
Investment
in GECS
|
–
|
–
|
||||
|
Goodwill
(Note 15)
|
81,759
|
81,116
|
||||
|
Other
intangible assets – net (Note 15)
|
14,977
|
16,142
|
||||
|
All
other assets (Note 16)
|
106,899
|
122,848
|
||||
|
Assets
of businesses held for sale (Note 17)
|
10,556
|
–
|
||||
|
Assets
of discontinued operations (Note 2)
|
1,723
|
8,889
|
||||
|
Total
assets
|
$
|
797,769
|
$
|
795,683
|
||
|
Liabilities
and equity
|
||||||
|
Short-term
borrowings (Note 18)
|
$
|
193,695
|
$
|
195,100
|
||
|
Accounts
payable, principally trade accounts
|
20,819
|
21,338
|
||||
|
Progress
collections and price adjustments accrued
|
12,536
|
9,885
|
||||
|
Dividends
payable
|
3,340
|
3,100
|
||||
|
Other
GE current liabilities
|
18,220
|
15,816
|
||||
|
Long-term
borrowings (Note 18)
|
330,067
|
319,013
|
||||
|
Investment
contracts, insurance liabilities and insurance
|
||||||
|
annuity
benefits (Note 19)
|
34,032
|
34,068
|
||||
|
All
other liabilities (Note 20)
|
64,796
|
59,316
|
||||
|
Deferred
income taxes (Note 21)
|
4,584
|
12,490
|
||||
|
Liabilities
of businesses held for sale (Note 17)
|
636
|
–
|
||||
|
Liabilities
of discontinued operations (Note 2)
|
1,432
|
1,994
|
||||
|
Total
liabilities
|
684,157
|
672,120
|
||||
|
Minority
interest in equity of consolidated affiliates (Note 22)
|
8,947
|
8,004
|
||||
|
Preferred
stock (30,000 and 0 shares outstanding at
|
||||||
|
year-end
2008 and 2007, respectively)
|
–
|
–
|
||||
|
Common
stock (10,536,897,000 and 9,987,599,000 shares
|
||||||
|
outstanding
at year-end 2008 and 2007, respectively)
|
702
|
669
|
||||
|
Accumulated
gains (losses) – net
|
||||||
|
Investment
securities
|
(3,094
|
)
|
124
|
|||
|
Currency
translation adjustments
|
(299
|
)
|
10,708
|
|||
|
Cash
flow hedges
|
(3,332
|
)
|
(668
|
)
|
||
|
Benefit
plans
|
(15,128
|
)
|
(1,840
|
)
|
||
|
Other
capital
|
40,390
|
26,100
|
||||
|
Retained
earnings
|
122,123
|
117,362
|
||||
|
Less
common stock held in treasury
|
(36,697
|
)
|
(36,896
|
)
|
||
|
Total
shareowners’ equity (Notes 23 and 24)
|
104,665
|
115,559
|
||||
|
Total
liabilities and equity
|
$
|
797,769
|
$
|
795,683
|
||
|
The
sum of accumulated gains (losses) on investment securities, currency
translation adjustments, cash flow hedges and benefit plans constitutes
“Accumulated other comprehensive income,” as shown in Note 23, and was
$(21,853) million and $8,324 million at December 31, 2008 and 2007,
respectively.
|
|
See
accompanying notes.
|
(72)
|
GE
|
GECS
|
|||||||||||
|
At
December 31 (In millions, except share amounts)
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Assets
|
||||||||||||
|
Cash
and equivalents
|
$
|
12,090
|
$
|
6,702
|
$
|
37,486
|
$
|
9,439
|
||||
|
Investment
securities (Note 9)
|
213
|
343
|
41,236
|
44,941
|
||||||||
|
Current
receivables (Note 10)
|
15,064
|
15,093
|
–
|
–
|
||||||||
|
Inventories
(Note 11)
|
13,597
|
12,834
|
77
|
63
|
||||||||
|
Financing
receivables – net (Notes 12 and 13)
|
–
|
–
|
372,456
|
384,067
|
||||||||
|
Other
GECS receivables
|
–
|
–
|
18,636
|
22,078
|
||||||||
|
Property,
plant and equipment – net (Note 14)
|
14,433
|
14,142
|
64,097
|
63,746
|
||||||||
|
Investment
in GECS
|
53,279
|
57,676
|
–
|
–
|
||||||||
|
Goodwill
(Note 15)
|
56,394
|
55,689
|
25,365
|
25,427
|
||||||||
|
Other
intangible assets – net (Note 15)
|
11,364
|
11,633
|
3,613
|
4,509
|
||||||||
|
All
other assets (Note 16)
|
22,435
|
40,608
|
85,721
|
83,392
|
||||||||
|
Assets
of businesses held for sale (Note 17)
|
–
|
–
|
10,556
|
–
|
||||||||
|
Assets
of discontinued operations (Note 2)
|
64
|
66
|
1,659
|
8,823
|
||||||||
|
Total
assets
|
$
|
198,933
|
$
|
214,786
|
$
|
660,902
|
$
|
646,485
|
||||
|
Liabilities
and equity
|
||||||||||||
|
Short-term
borrowings (Note 18)
|
$
|
2,375
|
$
|
4,106
|
$
|
193,533
|
$
|
192,420
|
||||
|
Accounts
payable, principally trade accounts
|
11,699
|
11,120
|
13,882
|
14,714
|
||||||||
|
Progress
collections and price adjustments accrued
|
13,058
|
10,374
|
–
|
–
|
||||||||
|
Dividends
payable
|
3,340
|
3,100
|
–
|
–
|
||||||||
|
Other
GE current liabilities
|
18,284
|
15,816
|
–
|
–
|
||||||||
|
Long-term
borrowings (Note 18)
|
9,827
|
11,656
|
321,068
|
308,502
|
||||||||
|
Investment
contracts, insurance liabilities and insurance
|
||||||||||||
|
annuity
benefits (Note 19)
|
–
|
–
|
34,369
|
34,359
|
||||||||
|
All
other liabilities (Note 20)
|
32,767
|
32,859
|
32,090
|
26,522
|
||||||||
|
Deferred
income taxes (Note 21)
|
(3,949
|
)
|
3,391
|
8,533
|
9,099
|
|||||||
|
Liabilities
of businesses held for sale (Note 17)
|
–
|
–
|
636
|
–
|
||||||||
|
Liabilities
of discontinued operations (Note 2)
|
189
|
302
|
1,243
|
1,692
|
||||||||
|
Total
liabilities
|
87,590
|
92,724
|
605,354
|
587,308
|
||||||||
|
Minority
interest in equity of consolidated affiliates (Note 22)
|
6,678
|
6,503
|
2,269
|
1,501
|
||||||||
|
Preferred
stock (30,000 and 0 shares outstanding at
|
||||||||||||
|
year-end
2008 and 2007, respectively)
|
–
|
–
|
–
|
–
|
||||||||
|
Common
stock (10,536,897,000 and 9,987,599,000 shares
|
||||||||||||
|
outstanding
at year-end 2008 and 2007, respectively)
|
702
|
669
|
1
|
1
|
||||||||
|
Accumulated
gains (losses) – net
|
||||||||||||
|
Investment
securities
|
(3,094
|
)
|
124
|
(3,097
|
)
|
110
|
||||||
|
Currency
translation adjustments
|
(299
|
)
|
10,708
|
(1,258
|
)
|
7,472
|
||||||
|
Cash
flow hedges
|
(3,332
|
)
|
(668
|
)
|
(3,134
|
)
|
(727
|
)
|
||||
|
Benefit
plans
|
(15,128
|
)
|
(1,840
|
)
|
(367
|
)
|
(105
|
)
|
||||
|
Other
capital
|
40,390
|
26,100
|
18,079
|
12,574
|
||||||||
|
Retained
earnings
|
122,123
|
117,362
|
43,055
|
38,351
|
||||||||
|
Less
common stock held in treasury
|
(36,697
|
)
|
(36,896
|
)
|
–
|
–
|
||||||
|
Total
shareowners’ equity (Notes 23 and 24)
|
104,665
|
115,559
|
53,279
|
57,676
|
||||||||
|
Total
liabilities and equity
|
$
|
198,933
|
$
|
214,786
|
$
|
660,902
|
$
|
646,485
|
||||
|
In
the consolidating data on this page, “GE” means the basis of consolidation
as described in Note 1 to the consolidated financial statements; “GECS”
means General Electric Capital Services, Inc. and all of its affiliates
and associated companies. Separate information is shown for “GE” and
“Financial Services (GECS).” Transactions between GE and GECS have been
eliminated from the “General Electric Company and consolidated affiliates”
columns on the prior page.
|
(73)
|
General
Electric Company
and
consolidated affiliates
|
|||||||||
|
For
the years ended December 31 (In millions)
|
2008
|
2007
|
2006
|
||||||
|
Cash
flows – operating activities
|
|||||||||
|
Net
earnings
|
$
|
17,410
|
$
|
22,208
|
$
|
20,742
|
|||
|
Loss
(earnings) from discontinued operations
|
679
|
249
|
(1,398
|
)
|
|||||
|
Adjustments
to reconcile net earnings to cash provided
|
|||||||||
|
from
operating activities
|
|||||||||
|
Depreciation
and amortization of property, plant and equipment
|
11,492
|
10,275
|
8,457
|
||||||
|
Earnings
from continuing operations retained by GECS
|
–
|
–
|
–
|
||||||
|
Deferred
income taxes
|
(1,284
|
)
|
657
|
1,639
|
|||||
|
Decrease
(increase) in GE current receivables
|
(24
|
)
|
(868
|
)
|
(2,194
|
)
|
|||
|
Decrease
(increase) in inventories
|
(719
|
)
|
(1,562
|
)
|
(1,514
|
)
|
|||
|
Increase
(decrease) in accounts payable
|
(1,078
|
)
|
(997
|
)
|
(276
|
)
|
|||
|
Increase
in GE progress collections
|
2,827
|
4,622
|
642
|
||||||
|
Provision
for losses on GECS financing receivables
|
7,518
|
4,431
|
3,062
|
||||||
|
All
other operating activities
|
11,020
|
927
|
3,352
|
||||||
|
Cash
from operating activities – continuing operations
|
47,841
|
39,942
|
32,512
|
||||||
|
Cash
from (used for) operating activities – discontinued
operations
|
760
|
3,380
|
(1,057
|
)
|
|||||
|
Cash
from operating activities
|
48,601
|
43,322
|
31,455
|
||||||
|
Cash
flows – investing activities
|
|||||||||
|
Additions
to property, plant and equipment
|
(16,010
|
)
|
(17,803
|
)
|
(15,788
|
)
|
|||
|
Dispositions
of property, plant and equipment
|
10,975
|
8,457
|
6,795
|
||||||
|
Net
increase in GECS financing receivables
|
(17,484
|
)
|
(44,237
|
)
|
(37,146
|
)
|
|||
|
Proceeds
from sales of discontinued operations
|
5,423
|
11,574
|
11,009
|
||||||
|
Proceeds
from principal business dispositions
|
4,986
|
2,746
|
1,883
|
||||||
|
Payments
for principal businesses purchased
|
(28,110
|
)
|
(17,215
|
)
|
(11,573
|
)
|
|||
|
All
other investing activities
|
195
|
(9,910
|
)
|
(6,053
|
)
|
||||
|
Cash
used for investing activities – continuing operations
|
(40,025
|
)
|
(66,388
|
)
|
(50,873
|
)
|
|||
|
Cash
from (used for) investing activities – discontinued
operations
|
(876
|
)
|
(3,116
|
)
|
(1,774
|
)
|
|||
|
Cash
used for investing activities
|
(40,901
|
)
|
(69,504
|
)
|
(52,647
|
)
|
|||
|
Cash
flows – financing activities
|
|||||||||
|
Net
increase (decrease) in borrowings (maturities of 90 days or
less)
|
(34,221
|
)
|
2,063
|
4,969
|
|||||
|
Newly
issued debt (maturities longer than 90 days)
|
122,959
|
100,869
|
88,364
|
||||||
|
Repayments
and other reductions (maturities longer than 90 days)
|
(69,050
|
)
|
(49,826
|
)
|
(49,346
|
)
|
|||
|
Proceeds
from issuance of preferred stock and warrants
|
2,965
|
–
|
–
|
||||||
|
Proceeds
from issuance of common stock
|
12,006
|
–
|
–
|
||||||
|
Net
purchases of GE shares for treasury
|
(1,249
|
)
|
(12,319
|
)
|
(8,554
|
)
|
|||
|
Dividends
paid to shareowners
|
(12,408
|
)
|
(11,492
|
)
|
(10,420
|
)
|
|||
|
All
other financing activities
|
3,638
|
(1,204
|
)
|
(1,174
|
)
|
||||
|
Cash
from (used for) financing activities – continuing
operations
|
24,640
|
28,091
|
23,839
|
||||||
|
Cash
from (used for) financing activities – discontinued
operations
|
(4
|
)
|
(154
|
)
|
(172
|
)
|
|||
|
Cash
from (used for) financing activities
|
24,636
|
27,937
|
23,667
|
||||||
|
Increase
(decrease) in cash and equivalents during year
|
32,336
|
1,755
|
2,475
|
||||||
|
Cash
and equivalents at beginning of year
|
16,031
|
14,276
|
11,801
|
||||||
|
Cash
and equivalents at end of year
|
48,367
|
16,031
|
14,276
|
||||||
|
Less
cash and equivalents of discontinued operations at end of
year
|
180
|
300
|
190
|
||||||
|
Cash
and equivalents of continuing operations at end of year
|
$
|
48,187
|
$
|
15,731
|
$
|
14,086
|
|||
|
Supplemental
disclosure of cash flows information
|
|||||||||
|
Cash
paid during the year for interest
|
$
|
(25,853
|
)
|
$
|
(23,340
|
)
|
$
|
(18,438
|
)
|
|
Cash
recovered (paid) during the year for income taxes
|
(3,237
|
)
|
(2,912
|
)
|
(2,869
|
)
|
|||
See
accompanying notes.
(74)
|
GE
|
GECS
|
|||||||||||||||||
|
For
the years ended December 31 (In millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||
|
|
|
|
|
|
||||||||||||||
|
Cash
flows – operating activities
|
||||||||||||||||||
|
Net
earnings
|
$
|
17,410
|
$
|
22,208
|
$
|
20,742
|
$
|
7,055
|
$
|
10,301
|
$
|
10,658
|
||||||
|
Loss
(earnings) from discontinued operations
|
679
|
249
|
(1,398
|
)
|
719
|
2,116
|
(439
|
)
|
||||||||||
|
Adjustments
to reconcile net earnings to cash
|
||||||||||||||||||
|
provided
from operating activities
|
||||||||||||||||||
|
Depreciation
and amortization of property,
|
||||||||||||||||||
|
plant
and equipment
|
2,162
|
2,149
|
1,953
|
9,330
|
8,126
|
6,504
|
||||||||||||
|
Earnings
from continuing operations retained by GECS
|
(5,423
|
)
|
(5,126
|
)
|
(372
|
)
|
–
|
–
|
–
|
|||||||||
|
Deferred
income taxes
|
(417
|
)
|
564
|
703
|
(867
|
)
|
93
|
936
|
||||||||||
|
Decrease
(increase) in GE current receivables
|
(168
|
)
|
14
|
760
|
–
|
–
|
–
|
|||||||||||
|
Decrease
(increase) in inventories
|
(524
|
)
|
(1,496
|
)
|
(1,458
|
)
|
(14
|
)
|
2
|
(23
|
)
|
|||||||
|
Increase
(decrease) in accounts payable
|
233
|
(1,073
|
)
|
289
|
(1,045
|
)
|
485
|
(154
|
)
|
|||||||||
|
Increase
in GE progress collections
|
2,896
|
4,620
|
927
|
–
|
–
|
–
|
||||||||||||
|
Provision
for losses on GECS financing receivables
|
–
|
–
|
–
|
7,518
|
4,431
|
3,062
|
||||||||||||
|
All
other operating activities
|
2,238
|
1,192
|
1,626
|
8,508
|
(539
|
)
|
1,035
|
|||||||||||
|
Cash
from operating activities – continuing operations
|
19,086
|
23,301
|
23,772
|
31,204
|
25,015
|
21,579
|
||||||||||||
|
Cash
from (used for) operating activities – discontinued
operations
|
(5
|
)
|
(857
|
)
|
855
|
765
|
4,039
|
(2,041
|
)
|
|||||||||
|
Cash
from operating activities
|
19,081
|
22,444
|
24,627
|
31,969
|
29,054
|
19,538
|
||||||||||||
|
Cash
flows – investing activities
|
||||||||||||||||||
|
Additions
to property, plant and equipment
|
(2,996
|
)
|
(2,968
|
)
|
(2,913
|
)
|
(13,321
|
)
|
(15,217
|
)
|
(13,168
|
)
|
||||||
|
Dispositions
of property, plant and equipment
|
–
|
–
|
–
|
10,975
|
8,457
|
6,795
|
||||||||||||
|
Net
increase in GECS financing receivables
|
–
|
–
|
–
|
(17,375
|
)
|
(44,164
|
)
|
(40,270
|
)
|
|||||||||
|
Proceeds
from sales of discontinued operations
|
203
|
10,826
|
1,987
|
5,220
|
117
|
9,022
|
||||||||||||
|
Proceeds
from principal business dispositions
|
58
|
1,047
|
1,497
|
4,928
|
1,699
|
386
|
||||||||||||
|
Payments
for principal businesses purchased
|
(3,149
|
)
|
(9,645
|
)
|
(4,274
|
)
|
(24,961
|
)
|
(7,570
|
)
|
(7,299
|
)
|
||||||
|
All
other investing activities
|
(5,176
|
)
|
(1,697
|
)
|
100
|
5,979
|
(8,730
|
)
|
(5,995
|
)
|
||||||||
|
Cash
used for investing activities – continuing operations
|
(11,060
|
)
|
(2,437
|
)
|
(3,603
|
)
|
(28,555
|
)
|
(65,408
|
)
|
(50,529
|
)
|
||||||
|
Cash
from (used for) investing activities – discontinued
operations
|
5
|
1,003
|
(914
|
)
|
(881
|
)
|
(3,921
|
)
|
(731
|
)
|
||||||||
|
Cash
used for investing activities
|
(11,055
|
)
|
(1,434
|
)
|
(4,517
|
)
|
(29,436
|
)
|
(69,329
|
)
|
(51,260
|
)
|
||||||
|
Cash
flows – financing activities
|
||||||||||||||||||
|
Net
increase (decrease) in borrowings (maturities of
|
||||||||||||||||||
|
90
days or less)
|
(2,152
|
)
|
(3,284
|
)
|
1,233
|
(31,282
|
)
|
3,397
|
6,470
|
|||||||||
|
Newly
issued debt (maturities longer than 90 days)
|
136
|
8,751
|
130
|
122,507
|
92,019
|
88,280
|
||||||||||||
|
Repayments
and other reductions (maturities longer
|
||||||||||||||||||
|
than
90 days)
|
(1,936
|
)
|
(298
|
)
|
(93
|
)
|
(67,114
|
)
|
(49,528
|
)
|
(49,253
|
)
|
||||||
|
Proceeds
from issuance of preferred stock and warrants
|
2,965
|
–
|
–
|
–
|
–
|
–
|
||||||||||||
|
Proceeds
from issuance of common stock
|
12,006
|
–
|
–
|
–
|
–
|
–
|
||||||||||||
|
Net
purchases of GE shares for treasury
|
(1,249
|
)
|
(12,319
|
)
|
(8,554
|
)
|
–
|
–
|
–
|
|||||||||
|
Dividends
paid to shareowners
|
(12,408
|
)
|
(11,492
|
)
|
(10,420
|
)
|
(2,351
|
)
|
(7,291
|
)
|
(9,847
|
)
|
||||||
|
All
other financing activities
|
–
|
–
|
–
|
3,638
|
(1,204
|
)
|
(1,174
|
)
|
||||||||||
|
Cash
from (used for) financing activities – continuing
operations
|
(2,638
|
)
|
(18,642
|
)
|
(17,704
|
)
|
25,398
|
37,393
|
34,476
|
|||||||||
|
Cash
from (used for) financing activities – discontinued
operations
|
–
|
(146
|
)
|
59
|
(4
|
)
|
(8
|
)
|
(231
|
)
|
||||||||
|
Cash
from (used for) financing activities
|
(2,638
|
)
|
(18,788
|
)
|
(17,645
|
)
|
25,394
|
37,385
|
34,245
|
|||||||||
|
Increase
(decrease) in cash and
|
||||||||||||||||||
|
equivalents
during year
|
5,388
|
2,222
|
2,465
|
27,927
|
(2,890
|
)
|
2,523
|
|||||||||||
|
Cash
and equivalents at beginning of year
|
6,702
|
4,480
|
2,015
|
9,739
|
12,629
|
10,106
|
||||||||||||
|
Cash
and equivalents at end of year
|
12,090
|
6,702
|
4,480
|
37,666
|
9,739
|
12,629
|
||||||||||||
|
Less
cash and equivalents of discontinued operations
|
||||||||||||||||||
|
at
end of year
|
–
|
–
|
–
|
180
|
300
|
190
|
||||||||||||
|
Cash
and equivalents of continuing operations at end of year
|
$
|
12,090
|
$
|
6,702
|
$
|
4,480
|
$
|
37,486
|
$
|
9,439
|
$
|
12,439
|
||||||
|
Supplemental
disclosure of cash
|
||||||||||||||||||
|
flows
information
|
||||||||||||||||||
|
Cash
paid during the year for interest
|
$
|
(1,190
|
)
|
$
|
(1,466
|
)
|
$
|
(1,343
|
)
|
$
|
(24,663
|
)
|
$
|
(21,874
|
)
|
$
|
(17,095
|
)
|
|
Cash
recovered (paid) during the year for income taxes
|
(2,627
|
)
|
(4,036
|
)
|
(2,203
|
)
|
(610
|
)
|
1,124
|
(666
|
)
|
|||||||
In the
consolidating data on this page, “GE” means the basis of consolidation as
described in Note 1 to the consolidated financial statements; “GECS” means
General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Separate information is shown for “GE” and “Financial Services
(GECS).” Transactions between GE and GECS have been eliminated from the “General
Electric Company and consolidated affiliates” columns on the prior
page.
(75)
Notes
to Consolidated Financial Statements
Accounting
Principles
Our
financial statements are prepared in conformity with U.S. generally accepted
accounting principles (GAAP).
Consolidation
Our
financial statements consolidate all of our affiliates – companies that we
control and in which we hold a majority voting interest. Associated companies
are companies that we do not control but over which we have significant
influence, most often because we hold a shareholder voting position of 20% to
50%. Results of associated companies are presented on a one-line basis.
Investments in and advances to associated companies are presented on a one-line
basis in the caption “All other assets” in our Statement of Financial Position,
net of allowance for losses that represents our best estimate of probable losses
inherent in such assets.
Financial
Statement Presentation
We have
reclassified certain prior-year amounts to conform to the current-year’s
presentation.
Financial
data and related measurements are presented in the following
categories:
|
·
|
GE – This represents the
adding together of all affiliates other than General Electric Capital
Services, Inc. (GECS), whose operations are presented on a one-line
basis.
|
|
·
|
GECS – This affiliate
owns all of the common stock of General Electric Capital Corporation (GE
Capital). GE Capital and its respective affiliates are consolidated in the
accompanying GECS columns and constitute the majority of its
business.
|
|
·
|
Consolidated – This
represents the adding together of GE and GECS, giving effect to the
elimination of transactions between GE and
GECS.
|
|
·
|
Operating Segments –
These comprise our five businesses, focused on the broad markets they
serve: Energy Infrastructure, Technology Infrastructure, NBC Universal,
Capital Finance and Consumer & Industrial. Prior period information
has been reclassified to be consistent with the current
organization.
|
Unless
otherwise indicated, information in these notes to consolidated financial
statements relates to continuing operations. Certain of our operations have been
presented as discontinued. See Note 2.
The
effects of translating to U.S. dollars the financial statements of non-U.S.
affiliates whose functional currency is the local currency are included in
shareowners’ equity. Asset and liability accounts are translated at year-end
exchange rates, while revenues and expenses are translated at average rates for
the respective periods.
Preparing
financial statements in conformity with U.S. GAAP requires us to make estimates
based on assumptions about current, and for some estimates future, economic and
market conditions (for example, unemployment, market liquidity, the real estate
market, etc.), which affect reported amounts and related disclosures in our
financial statements. Although our current estimates contemplate current
conditions and how we expect them to change in the future, as appropriate, it is
reasonably possible that in 2009 actual conditions could be worse than
anticipated in those estimates, which could materially affect our results of
operations and financial position. Among other effects, such changes could
result in future impairments of investment securities, goodwill, intangibles and
long-lived assets, incremental losses on financing receivables, establishment of
valuation allowances on deferred tax assets and increased tax
liabilities.
Sales
of Goods and Services
We
record all sales of goods and services only when a firm sales agreement is in
place, delivery has occurred or services have been rendered and collectibility
of the fixed or determinable sales price is reasonably assured.
(76)
Arrangements
for the sale of goods and services sometimes include multiple components. Most
of our multiple component arrangements involve the sale of goods and services in
the Technology Infrastructure segment. Our arrangements with multiple components
usually involve future service deliverables such as installation, training or
the future delivery of ancillary equipment. In such agreements, the amount
assigned to each component is based on the total price and the undelivered
component’s objectively determined fair value, determined from sources such as
the separate selling price for that or a similar component or from competitor
prices for similar components. If fair value of an undelivered component cannot
be satisfactorily determined, we defer revenue until all multiple components are
delivered.
Except
for goods sold under long-term agreements, we recognize sales of goods under the
provisions of U.S. Securities and Exchange Commission (SEC) Staff Accounting
Bulletin (SAB) 104, Revenue
Recognition. We often sell consumer products, home videos and computer
hardware and software products with a right of return. We use our accumulated
experience to estimate and provide for such returns when we record the sale. In
situations where arrangements include customer acceptance provisions based on
seller or customer-specified objective criteria, we recognize revenue when
formal acceptance occurs or we have reliably demonstrated that all specified
acceptance criteria have been met. In arrangements where we provide goods for
trial and evaluation purposes, we only recognize revenue after customer
acceptance occurs. Unless otherwise noted, we do not provide for anticipated
losses before we record sales.
Certain
of our sales of goods and services involve inconsequential or perfunctory
performance obligations. These obligations can include non-essential
installation or training, and in some instances provision of product manuals and
limited technical product support. When the only remaining undelivered
performance obligation under an arrangement is inconsequential or perfunctory,
we recognize revenue on the total contract and provide for the cost of the
unperformed obligation.
We
recognize revenue on agreements for sales of goods and services under power
generation unit and uprate contracts; nuclear fuel assemblies; larger oil
drilling equipment projects; aeroderivative unit contracts; military development
contracts; and long-term construction projects, including construction of
information technology systems in our Healthcare business, under American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts.
Under SOP 81-1, we estimate total contract revenue net of price concessions as
well as total contract costs. For goods sold under power generation unit and
uprate contracts, nuclear fuel assemblies, aeroderivative unit contracts and
military development contracts, we recognize sales as we complete major
contract-specified deliverables, most often when customers receive title to the
goods or accept the services as performed. For larger oil drilling equipment
projects and long-term construction projects, we recognize sales based on our
progress towards contract completion measured by actual costs incurred in
relation to our estimate of total expected costs. We measure SOP 81-1 revenues
by applying our contract-specific estimated margin rates to incurred costs. We
routinely update our estimates of future costs for agreements in process and
report any cumulative effects of such adjustments in current operations. We
provide for any loss that we expect to incur on these agreements when that loss
is probable.
We
recognize revenue upon delivery for sales of aircraft engines, military
propulsion equipment and related spare parts not sold under long-term product
services agreements. Delivery of commercial engines, non-U.S. military equipment
and all related spare parts occurs on shipment; delivery of military propulsion
equipment sold to the U.S. Government or agencies thereof occurs upon receipt of
a Material Inspection and Receiving Report, DD Form 250 or Memorandum of
Shipment. Commercial aircraft engines are complex aerospace equipment
manufactured to customer order under a variety of sometimes-complex, long-term
agreements. We measure sales of commercial aircraft engines by applying our
contract-specific estimated margin rates to incurred costs. We routinely update
our estimates of future costs for commercial aircraft engine agreements in
process and report any cumulative effects of such adjustments in current
operations. We measure revenue for military propulsion equipment and spare parts
not subject to long-term product services agreements based on the specific
contract on a specifically-measured output basis. We provide for any loss that
we expect to incur on these agreements when that loss is probable; consistent
with industry practice, for commercial aircraft engines, we make such provision
only if such losses are not recoverable from future highly probable sales of
spare parts for those engines.
(77)
We sell
product services under long-term agreements in our Technology Infrastructure and
Energy Infrastructure segments, principally in Aviation, Energy and
Transportation, where costs of performing services are incurred on other than a
straight-line basis. We also sell product services in Healthcare, where such
costs generally are expected to be on a straight-line basis. These agreements
are accounted for under Financial Accounting Standards Board (FASB) Technical
Bulletin (FTB) 90-1, Accounting for Separately Priced
Extended Warranty and Product Maintenance Contracts. For the Aviation,
Energy and Transportation FTB 90-1 agreements, we recognize related sales based
on the extent of our progress towards completion measured by actual costs
incurred in relation to total expected costs. We routinely update our estimates
of future costs for agreements in process and report any cumulative effects of
such adjustments in current operations. For the Healthcare FTB 90-1 agreements,
we recognize revenues on a straight-line basis and expense related costs as
incurred. We provide for any loss that we expect to incur on any of these
agreements when that loss is probable.
NBC
Universal records broadcast and cable television and Internet advertising sales
when advertisements are aired, net of provision for any viewer shortfalls (make
goods). We record sales from theatrical distribution of films as the films are
exhibited; sales of home videos, net of a return provision, when the videos are
delivered to and available for sale by retailers; fees from cable/satellite
operators when services are provided; and licensing of film and television
programming when we make the material available for airing.
GECS
Revenues from Services (Earned Income)
We use
the interest method to recognize income on all loans. Interest on loans includes
origination, commitment and other non-refundable fees related to funding
(recorded in earned income on the interest method). We stop accruing interest at
the earlier of the time at which collection of an account becomes doubtful or
the account becomes 90 days past due. We recognize interest income on nonearning
loans either as cash is collected or on a cost-recovery basis as conditions
warrant. We resume accruing interest on nonearning, non-restructured commercial
loans only when (a) payments are brought current according to the loan’s
original terms and (b) future payments are reasonably assured. When we agree to
restructured terms with the borrower, we resume accruing interest only when
reasonably assured that we will recover full contractual payments, and such
loans pass underwriting reviews equivalent to those applied to new loans. We
resume accruing interest on nonearning consumer loans when the customer’s
account is less than 90 days past due.
We
recognize financing lease income on the interest method to produce a level yield
on funds not yet recovered. Estimated unguaranteed residual values at the date
of lease inception represent our initial estimates of the fair value of the
leased assets at the expiration of the lease and are based primarily on
independent appraisals, which are updated periodically. Guarantees of residual
values by unrelated third parties are considered part of minimum lease payments.
Significant assumptions we use in estimating residual values include estimated
net cash flows over the remaining lease term, anticipated results of future
remarketing, and estimated future component part and scrap metal prices,
discounted at an appropriate rate.
We
recognize operating lease income on a straight-line basis over the terms of
underlying leases.
Fees
include commitment fees related to loans that we do not expect to fund and
line-of-credit fees. We record these fees in earned income on a straight-line
basis over the period to which they relate. We record syndication fees in earned
income at the time related services are performed, unless significant
contingencies exist.
Depreciation
and Amortization
The cost
of GE manufacturing plant and equipment is depreciated over its estimated
economic life. U.S. assets are depreciated using an accelerated method based on
a sum-of-the-years digits formula; non-U.S. assets are generally depreciated on
a straight-line basis.
The cost
of GECS equipment leased to others on operating leases is depreciated on a
straight-line basis to estimated residual value over the lease term or over the
estimated economic life of the equipment.
The cost
of GECS acquired real estate investments is depreciated on a straight-line basis
to the estimated salvage value over the expected useful life or the estimated
proceeds upon sale of the investment at the end of the expected holding period
if that approach produces a higher measure of depreciation expense.
(78)
The cost
of individually significant customer relationships is amortized in proportion to
estimated total related sales; cost of other intangible assets is generally
amortized on a straight-line basis over the asset’s estimated economic life. We
review long-lived assets for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable.
See Notes 14 and 15.
NBC
Universal Film and Television Costs
We defer
film and television production costs, including direct costs, production
overhead, development costs and interest. We do not defer costs of exploitation,
which principally comprise costs of film and television program marketing and
distribution. We amortize deferred film and television production costs, as well
as associated participation and residual costs, on an individual production
basis using the ratio of the current period’s gross revenues to estimated total
remaining gross revenues from all sources; we state such costs at the lower of
amortized cost or fair value. Estimates of total revenues and costs are based on
anticipated release patterns, public acceptance and historical results for
similar products. We defer the costs of acquired broadcast material, including
rights to material for use on NBC Universal’s broadcast and cable/satellite
television networks, at the earlier of acquisition or when the license period
begins and the material is available for use. We amortize acquired broadcast
material and rights when we broadcast the associated programs; we state such
costs at the lower of amortized cost or net realizable value.
Losses
on Financing Receivables
Our
allowance for losses on financing receivables represents our best estimate of
probable losses inherent in the portfolio. Our method of calculating estimated
losses depends on the size, type and risk characteristics of the related
receivables. Write-offs are deducted from the allowance for losses and
subsequent recoveries are added. Impaired financing receivables are written down
to the extent that we judge principal to be uncollectible.
Our
portfolio consists entirely of homogenous consumer loans and of commercial loans
and leases. The underlying assumptions, estimates and assessments we use to
provide for losses are continually updated to reflect our view of current
conditions. Changes in such estimates can significantly affect the allowance and
provision for losses. It is possible to experience credit losses that are
different from our current estimates.
Our
consumer loan portfolio consists of smaller balance, homogenous loans including
card receivables, installment loans, auto loans and leases and residential
mortgages. We collectively evaluate each portfolio for impairment quarterly. The
allowance for losses on these receivables is established through a process that
estimates the probable losses inherent in the portfolio based upon statistical
analyses of portfolio data. These analyses include migration analysis, in which
historical delinquency and credit loss experience is applied to the current
aging of the portfolio, together with other analyses that reflect current trends
and conditions. We also consider overall portfolio indicators including
nonearning loans, trends in loan volume and lending terms, credit policies and
other observable environmental factors.
We write
off unsecured closed-end installment loans at 120 days contractually past due
and unsecured open-ended revolving loans at 180 days contractually past due. We
write down consumer loans secured by collateral other than residential real
estate when such loans are 120 days past due. Consumer loans secured by
residential real estate (both revolving and closed-end loans) are written down
to the fair value of collateral, less costs to sell, no later than when they
become 360 days past due. During 2007, we conformed our reserving methodology in
our residential mortgage loan portfolios. Unsecured consumer loans in bankruptcy
are written off within 60 days of notification of filing by the bankruptcy court
or within contractual write-off periods, whichever occurs earlier.
(79)
Our
commercial loan and lease portfolio consists of a variety of loans and leases,
including both larger balance, non-homogenous loans and leases and smaller
balance homogenous commercial and equipment loans and leases. Losses on such
loans and leases are recorded when probable and estimable. We routinely evaluate
our entire portfolio for potential specific credit or collection issues that
might indicate an impairment. For larger balance, non-homogenous loans and
leases, this survey first considers the financial status, payment history,
collateral value, industry conditions and guarantor support related to specific
customers. Any delinquencies or bankruptcies are indications of potential
impairment requiring further assessment of collectibility. We routinely receive
financial as well as rating agency reports on our customers, and we elevate for
further attention those customers whose operations we judge to be marginal or
deteriorating. We also elevate customers for further attention when we observe a
decline in collateral values for asset-based loans. While collateral values are
not always available, when we observe such a decline, we evaluate relevant
markets to assess recovery alternatives – for example, for real estate loans,
relevant markets are local; for aircraft loans, relevant markets are global. We
provide allowances based on our evaluation of all available information,
including expected future cash flows, fair value of collateral, net of disposal
costs, and the secondary market value of the financing receivables. After
providing for specific incurred losses, we then determine an allowance for
losses that have been incurred in the balance of the portfolio but cannot yet be
identified to a specific loan or lease. This estimate is based on historical and
projected default rates and loss severity, and it is prepared by each respective
line of business.
Experience
is not available with new products; therefore, while we are developing that
experience, we set loss allowances based on our experience with the most closely
analogous products in our portfolio.
When we
repossess collateral in satisfaction of a loan, we write down the receivable
against the allowance for losses. Repossessed collateral is included in the
caption “All other assets” in the Statement of Financial Position and carried at
the lower of cost or estimated fair value less costs to sell.
The
remainder of our commercial loans and leases are portfolios of smaller balance
homogenous commercial and equipment positions that we evaluate collectively by
portfolio for impairment based upon various statistical analyses considering
historical losses and aging, as well as our view on current market and economic
conditions.
Partial
Sales of Business Interests
We
record gains or losses on sales of their own shares by affiliates except when
realization of gains is not reasonably assured, in which case we record the
results in shareowners’ equity. We record gains or losses on sales of interests
in commercial and military engine and aeroderivative equipment
programs.
Cash
and Equivalents
Debt
securities and money market instruments with original maturities of three months
or less are included in cash equivalents unless designated as available-for-sale
and classified as investment securities.
Investment
Securities
We
report investments in debt and marketable equity securities, and equity
securities in our insurance portfolio, at fair value. See Note 28 for further
information on fair value. Unrealized gains and losses on available-for-sale
investment securities are included in shareowners’ equity, net of applicable
taxes and other adjustments. 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. Unrealized losses that are other than
temporary are recognized in earnings. Realized gains and losses are accounted
for on the specific identification method. Unrealized gains and losses on
investment securities classified as trading and certain retained interests are
included in earnings.
Inventories
All
inventories are stated at the lower of cost or realizable values. Cost for a
significant portion of GE U.S. inventories is determined on a last-in, first-out
(LIFO) basis. Cost of other GE inventories is determined on a first-in,
first-out (FIFO) basis. LIFO was used for 40% and 41% of GE inventories at
December 31, 2008 and 2007, respectively. GECS inventories consist of finished
products held for sale; cost is determined on a FIFO basis.
(80)
Intangible
Assets
We do
not amortize goodwill, but test it at least annually for impairment using a fair
value approach at the reporting unit level. A reporting unit is the operating
segment, or a business one level below that operating segment (the component
level) if discrete financial information is prepared and regularly reviewed by
segment management. However, components are aggregated as a single reporting
unit if they have similar economic characteristics. We recognize an impairment
charge if the carrying amount of a reporting unit exceeds its fair value and the
carrying amount of the reporting unit’s goodwill exceeds the implied fair value
of that goodwill. We use discounted cash flows to establish fair values. When
available and as appropriate, we use comparative market multiples to corroborate
discounted cash flow results. When all or a portion of a reporting unit is
disposed of, goodwill is allocated to the gain or loss on disposition based on
the relative fair values of the business disposed of and the portion of the
reporting unit that will be retained.
We
amortize the cost of other intangibles over their estimated useful lives unless
such lives are deemed indefinite. The cost of intangible assets is generally
amortized on a straight-line basis over the asset’s estimated economic life,
except that individually significant customer-related intangible assets are
amortized in relation to total related sales. Amortizable intangible assets are
tested for impairment based on undiscounted cash flows and, if impaired, written
down to fair value based on either discounted cash flows or appraised values.
Intangible assets with indefinite lives are tested annually for impairment and
written down to fair value as required.
GECS
Investment Contracts, Insurance Liabilities and Insurance Annuity
Benefits
Certain
entities, which we consolidate, provide guaranteed investment contracts to
states, municipalities and municipal authorities.
Our
insurance activities also include providing insurance and reinsurance for life
and health risks and providing certain annuity products. Three product groups
are provided: traditional insurance contracts, investment contracts and
universal life insurance contracts. Insurance contracts are contracts with
significant mortality and/or morbidity risks, while investment contracts are
contracts without such risks. Universal life insurance contracts are a
particular type of long-duration insurance contract whose terms are not fixed
and guaranteed.
For
short-duration insurance contracts, including accident and health insurance, we
report premiums as earned income over the terms of the related agreements,
generally on a pro-rata basis. For traditional long-duration insurance contracts
including term, whole life and annuities payable for the life of the annuitant,
we report premiums as earned income when due.
Premiums
received on investment contracts (including annuities without significant
mortality risk) and universal life contracts are not reported as revenues but
rather as deposit liabilities. We recognize revenues for charges and assessments
on these contracts, mostly for mortality, contract initiation, administration
and surrender. Amounts credited to policyholder accounts are charged to
expense.
Liabilities
for traditional long-duration insurance contracts represent the present value of
such benefits less the present value of future net premiums based on mortality,
morbidity, interest and other assumptions at the time the policies were issued
or acquired. Liabilities for investment contracts and universal life policies
equal the account value, that is, the amount that accrues to the benefit of the
contract or policyholder including credited interest and assessments through the
financial statement date.
Liabilities
for unpaid claims and claims adjustment expenses represent our best estimate of
the ultimate obligations for reported and incurred-but-not-reported claims and
the related estimated claim settlement expenses. Liabilities for unpaid claims
and claims adjustment expenses are continually reviewed and adjusted through
current operations.
Accounting
Changes
Effective
January 1, 2008, we adopted 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. SFAS 157 establishes a
new framework for measuring fair value and expands related disclosures. See Note
28.
Effective
January 1, 2008, we adopted SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities. Upon adoption, we elected to report
$172 million of commercial mortgage loans at fair value in order to recognize
them on the same accounting basis (measured at fair value through earnings) as
the derivatives economically hedging these loans. See Note 28.
(81)
On
January 1, 2007, we adopted FASB Interpretation (FIN) 48, Accounting for Uncertainty in Income
Taxes, and FASB Staff Position (FSP) FAS 13-2, Accounting for a Change or Projected
Change in the Timing of Cash Flows Relating to Income Taxes Generated by a
Leveraged Lease Transaction. Among other things, FIN 48 requires
application of a “more likely than not” threshold to the recognition and
derecognition of tax positions. FSP FAS 13-2 requires recalculation of returns
on leveraged leases when there is a change in the timing or projected timing of
cash flows relating to income taxes associated with such leases. The January 1,
2007 transition reduced our retained earnings by $126 million, $49 million
associated with FIN 48 and $77 million with FSP FAS 13-2. Of this total, $89
million was a decrease in goodwill and $77 million was a decrease in financing
receivables – net, partially offset by a $40 million decrease in income tax
liabilities.
On
January 1, 2007, we adopted SFAS 155, Accounting for Certain Hybrid
Financial Instruments. This statement amended SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, as amended, to include within its
scope prepayment features in newly created or acquired retained interests
related to securitizations. SFAS 155 changed the basis on which we recognize
earnings on these retained interests from level yield to fair value. See Notes 9
and 30.
We
adopted SFAS 123 (Revised 2004), Share-Based Payment (SFAS
123R) and related FSPs, effective January 1, 2006. Among other things, SFAS 123R
requires expensing the fair value of stock options, a previously optional
accounting method that we adopted voluntarily in 2002, and classification of
excess tax benefits associated with share-based compensation deductions as cash
from financing activities rather than cash from operating activities. We chose
the modified prospective transition method, which requires that the new guidance
be applied to the unvested portion of all outstanding stock option grants as of
January 1, 2006, and to new grants after that date. We further applied the
alternative transition method provided in FSP FAS 123(R)-3, Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards. The
transitional effects of SFAS 123R and related FSPs consisted of a reduction in
net earnings of $10 million for the year ended December 31, 2006, to expense the
unvested portion of options granted in 2001; and classification of $173 million
related to excess tax benefits from share-based compensation deductions as cash
from financing activities in our Statement of Cash Flows beginning in 2006,
which previously would have been included in cash from operating
activities.
SFAS
158, Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, became effective
for us as of December 31, 2006, and requires recognition of an asset or
liability in the statement of financial position reflecting the funded status of
pension and other postretirement benefit plans such as retiree health and life,
with current-year changes in the funded status recognized in shareowners’
equity. SFAS 158 did not change the existing criteria for measurement of
periodic benefit costs, plan assets or benefit obligations. The incremental
effect of the initial adoption of SFAS 158 reduced our shareowners’ equity at
December 31, 2006, by $3,819 million.
On
December 12, 2008, the FASB issued FSP EITF 99-20-1, Amendments to the Impairment
Guidance of EITF Issue No. 99-20. The primary change in reporting that
results from the FSP, which we adopted in the fourth quarter of 2008, is the
requirement to estimate cash flows based on management’s best estimate rather
than based on market participant assumptions.
NOTE
2. DISCONTINUED OPERATIONS
Discontinued
operations comprised our Japanese personal loan business (Lake) and our Japanese
mortgage and card businesses, excluding our minority ownership in GE Nissen
Credit Co., Ltd. (GE Money Japan), 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 for all
periods presented.
(82)
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. As a
result, we recognized an after-tax loss of $908 million in 2007. During 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. In connection with the transaction, GE Money Japan
reduced the proceeds on the sale for estimated interest refund claims in excess
of the statutory interest rate. Proceeds from the sale may be increased or
decreased based on the actual claims experienced in accordance with terms
specified in the agreement, and will not be adjusted unless claims exceed
approximately $3,000 million. 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. In connection with this sale, and
primarily related to our Japanese mortgage and card businesses, we recorded an
incremental $361 million loss in 2008. GE Money Japan revenues from discontinued
operations were $763 million, $1,307 million and $1,715 million in 2008, 2007
and 2006, respectively. In total, GE Money Japan losses from discontinued
operations, net of taxes, were $651 million and $1,220 million in 2008 and 2007,
respectively, compared with earnings of $247 million in 2006.
WMC
During
the fourth quarter of 2007, we completed the sale of our U.S. mortgage business.
As a result, we recognized an after-tax loss of $62 million in 2007. 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 $244 million
at December 31, 2008, and $265 million at December 31, 2007. 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 $(71) million, $(1,424) million and
$536 million in 2008, 2007 and 2006, respectively. In total, WMC’s losses from
discontinued operations, net of taxes, were $41 million and $987 million in 2008
and 2007, respectively, compared with earnings of $29 million in
2006.
Plastics
and Advanced Materials
During
the third quarter of 2007, we completed the sale of our Plastics business to
Saudi Basic Industries Corporation for $11,577 million in cash. We sold this
business because of its cyclicality, rising costs of natural gas and raw
materials, and the decision to redeploy capital resources into higher-growth
businesses. Also, during the fourth quarter of 2006, we sold our Advanced
Materials business. As a result of these sales, we recognized after-tax gains of
$21 million, $1,578 million and $441 million during 2008, 2007 and 2006,
respectively. Plastics and Advanced Materials revenues from discontinued
operations were $4,286 million and $8,795 million in 2007 and 2006,
respectively. In total, Plastics and Advanced Materials earnings from
discontinued operations, net of taxes, were $40 million, $1,867 million and $959
million in 2008, 2007 and 2006, respectively.
GE
Life
During
the fourth quarter of 2006, we completed the sale of GE Life, our U.K.-based
life insurance operation, to Swiss Reinsurance Company (Swiss Re) for $910
million. As a result, we recognized after-tax losses of $3 million in both 2008
and 2007, and $267 million in 2006. GE Life revenues from discontinued
operations were $2,096 million in 2006. In total, GE Life losses from
discontinued operations, net of taxes, were $3 million in both 2008 and 2007,
and $178 million in 2006.
(83)
GE
Insurance Solutions
During
the second quarter of 2006, we completed the sale of the property and casualty
insurance and reinsurance businesses and the European life and health operations
of GE Insurance Solutions to Swiss Re for $9,297 million, including the
assumption of $1,700 million of debt. We received $5,359 million in cash and
$2,238 million of newly issued Swiss Re common stock, representing a 9% interest
in Swiss Re. As a result of the exit, we recognized earnings of $1 million and
$16 million in 2008 and 2007, compared with losses of $134 million in 2006. GE
Insurance Solutions revenues from discontinued operations were $2,815 million in
2006. In total, GE Insurance Solutions loss from discontinued operations, net of
taxes, was $15 million in 2008, compared with earnings of $15 million and $148
million in 2007 and 2006, respectively.
Genworth
During
the first quarter of 2006, we completed the sale of our remaining 18% investment
in Genworth through a secondary public offering of 71 million shares of Class A
Common Stock and direct sale to Genworth of 15 million shares of Genworth Class
B Common Stock. As a result of initial and secondary public offerings, we
recognized after-tax gains of $3 million, $85 million (primarily from a tax
adjustment related to the 2004 initial public offering) and $220 million in
2008, 2007 and 2006, respectively. Genworth revenues from discontinued
operations were $5 million in 2006. In total, Genworth loss from discontinued
operations, net of taxes, was $9 million in 2008, compared with earnings of $79
million and $193 million in 2007 and 2006, respectively.
Summarized
financial information for discontinued GE industrial operations is shown
below.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Operations
|
|||||||||
|
Total
revenues
|
$
|
–
|
$
|
4,286
|
$
|
8,795
|
|||
|
Earnings
from discontinued operations before income taxes
|
$
|
–
|
$
|
233
|
$
|
577
|
|||
|
Income
tax benefit (expense)
|
19
|
56
|
(59
|
)
|
|||||
|
Earnings
from discontinued operations before disposal, net of taxes
|
$
|
19
|
$
|
289
|
$
|
518
|
|||
|
Disposal
|
|||||||||
|
Gain
on disposal before income taxes
|
$
|
21
|
$
|
2,362
|
$
|
357
|
|||
|
Income
tax benefit (expense)
|
–
|
(784
|
)
|
84
|
|||||
|
Gain
on disposal, net of taxes
|
$
|
21
|
$
|
1,578
|
$
|
441
|
|||
|
Earnings from
discontinued
operations, net of taxes(a)
|
$
|
40
|
$
|
1,867
|
$
|
959
|
|||
|
(a)
|
The
sum of GE industrial earnings from discontinued operations, net of taxes,
and GECS earnings (loss) from discontinued operations, net of taxes, below
are reported as GE industrial earnings (loss) from discontinued
operations, net of taxes, on the Statement of
Earnings.
|
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Assets
|
||||||
|
Property,
plant and equipment – net
|
$
|
–
|
$
|
9
|
||
|
Current
receivables
|
64
|
57
|
||||
|
Assets
of discontinued operations
|
$
|
64
|
$
|
66
|
||
|
Liabilities
|
||||||
|
Other
GE current liabilities
|
$
|
36
|
$
|
146
|
||
|
Other
|
153
|
156
|
||||
|
Liabilities
of discontinued operations
|
$
|
189
|
$
|
302
|
(84)
Summarized
financial information for discontinued GECS operations is shown
below.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Operations
|
|||||||||
|
Total
revenues
|
$
|
692
|
$
|
(117
|
)
|
$
|
7,167
|
||
|
Earnings
(loss) from discontinued operations before income taxes
|
$
|
(571
|
)
|
$
|
(2,225
|
)
|
$
|
641
|
|
|
Income
tax benefit (expense)
|
212
|
981
|
(21
|
)
|
|||||
|
Earnings
(loss) from discontinued operations before disposal,
|
|||||||||
|
net
of taxes
|
$
|
(359
|
)
|
$
|
(1,244
|
)
|
$
|
620
|
|
|
Disposal
|
|||||||||
|
Loss
on disposal before income taxes
|
$
|
(1,479
|
)
|
$
|
(1,510
|
)
|
$
|
(75
|
)
|
|
Income
tax benefit (expense)
|
1,119
|
638
|
(106
|
)
|
|||||
|
Loss
on disposal, net of taxes
|
$
|
(360
|
)
|
$
|
(872
|
)
|
$
|
(181
|
)
|
|
Earnings
(loss) from discontinued operations, net of taxes
|
$
|
(719
|
)
|
$
|
(2,116
|
)
|
$
|
439
|
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Assets
|
||||||
|
Cash
and equivalents
|
$
|
180
|
$
|
300
|
||
|
Financing
receivables – net
|
–
|
6,675
|
||||
|
All
other assets
|
19
|
129
|
||||
|
Other
|
1,460
|
1,719
|
||||
|
Assets
of discontinued operations
|
$
|
1,659
|
$
|
8,823
|
||
|
Liabilities
|
||||||
|
Liabilities
of discontinued operations
|
$
|
1,243
|
$
|
1,692
|
Assets
at 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.
NOTE
3. OTHER INCOME
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
|
|||||||||
|
Sales
of business interests(a)
|
$
|
891
|
$
|
1,541
|
$
|
878
|
|||
|
Interest
income from GECS
|
371
|
329
|
145
|
||||||
|
Associated
companies
|
332
|
671
|
437
|
||||||
|
Licensing
and royalty income
|
291
|
255
|
220
|
||||||
|
Marketable
securities and bank deposits
|
196
|
282
|
272
|
||||||
|
Other
items
|
(116
|
)
|
293
|
355
|
|||||
|
1,965
|
3,371
|
2,307
|
|||||||
|
Eliminations
|
(379
|
)
|
(352
|
)
|
(153
|
)
|
|||
|
Total
|
$
|
1,586
|
$
|
3,019
|
$
|
2,154
|
|||
|
(a)
|
Included
gain on sale of a business interest to Hitachi of $900 million in
2007.
|
(85)
NOTE
4. GECS REVENUES FROM SERVICES
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Interest
on loans
|
$
|
27,109
|
$
|
23,599
|
$
|
20,358
|
|||
|
Equipment
leased to others
|
15,568
|
15,260
|
12,940
|
||||||
|
Fees
|
6,126
|
6,533
|
5,358
|
||||||
|
Financing
leases
|
4,374
|
4,699
|
4,298
|
||||||
|
Real
estate investments
|
3,505
|
4,669
|
3,138
|
||||||
|
Premiums
earned by insurance activities
|
2,255
|
2,232
|
2,084
|
||||||
|
Associated
companies
|
2,217
|
2,172
|
2,079
|
||||||
|
Investment
income(a)
|
2,191
|
4,724
|
3,115
|
||||||
|
Net
securitization gains
|
1,133
|
1,804
|
1,187
|
||||||
|
Other
items
|
5,036
|
5,526
|
4,410
|
||||||
|
Total
|
$
|
69,514
|
$
|
71,218
|
$
|
58,967
|
|||
|
(a)
|
Included gain
on sale of Swiss Re common stock of $566 million in 2007 and
other-than-temporary impairments on investment securities of $1,420
million, $127 million and $139 million in 2008, 2007 and 2006,
respectively.
|
NOTE
5. SUPPLEMENTAL COST INFORMATION
We
funded research and development expenditures of $3,020 million in 2008, $3,009
million in 2007 and $2,790 million in 2006. In addition, research and
development funding from customers, principally the U.S. government, totaled
$1,287 million, $1,066 million and $690 million in 2008, 2007 and 2006,
respectively.
Rental
expense under operating leases is shown below.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
|
$
|
912
|
$
|
929
|
$
|
854
|
|||
|
GECS
|
992
|
955
|
863
|
At
December 31, 2008, minimum rental commitments under noncancellable operating
leases aggregated $3,022 million and $3,565 million for GE and GECS,
respectively. Amounts payable over the next five years follow.
|
(In
millions)
|
2009
|
2010
|
2011
|
2012
|
2013
|
||||||||||
|
GE
|
$
|
550
|
$
|
548
|
$
|
496
|
$
|
429
|
$
|
390
|
|||||
|
GECS
|
774
|
621
|
508
|
435
|
303
|
Payments
under revenue sharing partnerships amounted to $2,290 million, $1,878 million
and $1,413 million in 2008, 2007 and 2006, respectively, and are included in
cost of goods sold. GE’s selling, general and administrative expenses totaled
$14,401 million in 2008, $14,148 million in 2007 and $12,893 million in
2006.
NOTE
6. POSTRETIREMENT BENEFIT PLANS
Retiree
Health and Life Benefits
We
sponsor a number of retiree health and life insurance benefit plans (retiree
benefit plans). Principal retiree benefit plans are discussed below; other such
plans are not significant individually or in the aggregate. We use a December 31
measurement date for our plans.
Principal Retiree Benefit
Plans provide health and life insurance benefits to certain employees who
retire under the GE Pension Plan with 10 or more years of service. Eligible
retirees share in the cost of healthcare benefits. These plans cover
approximately 225,000 retirees and dependents.
(86)
Cost
Of Principal Retiree Benefit Plans
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Expected
return on plan assets
|
$
|
(131
|
)
|
$
|
(125
|
)
|
$
|
(127
|
)
|
|
Service
cost for benefits earned
|
326
|
286
|
229
|
||||||
|
Interest
cost on benefit obligation
|
750
|
577
|
455
|
||||||
|
Prior
service cost amortization
|
673
|
603
|
363
|
||||||
|
Net
actuarial loss (gain) amortization
|
(49
|
)
|
(17
|
)
|
64
|
||||
|
Retiree
benefit plans cost
|
$
|
1,569
|
$
|
1,324
|
$
|
984
|
Actuarial assumptions are
described below. The
discount rates at December 31 measured the year-end benefit obligations and the
earnings effects for the subsequent year.
|
December
31
|
2008
|
2007
|
2006
|
2005
|
||||||||
|
Discount
rate
|
6.15
|
%
|
6.31
|
%(a)
|
5.75
|
%
|
5.25
|
%
|
||||
|
Compensation
increases
|
4.20
|
5.00
|
5.00
|
5.00
|
||||||||
|
Expected
return on assets
|
8.50
|
8.50
|
8.50
|
8.50
|
||||||||
|
Initial
healthcare trend rate(c)
|
7.00
|
(b)
|
9.10
|
9.20
|
10.00
|
|||||||
|
(a)
|
Weighted
average discount rate of 6.34% was used for determination of costs in
2008.
|
|
(b)
|
Includes
benefits from new healthcare supplier contracts.
|
|
(c)
|
For
2008, ultimately declining to 6% for 2025 and
thereafter.
|
To
determine the expected long-term rate of return on retiree life plan assets, we
consider current and expected asset allocations, as well as historical and
expected returns on various categories of plan assets. We apply our expected
rate of return to a market-related value of assets, which stabilizes variability
in the amounts to which we apply that expected return.
We
amortize experience gains and losses as well as the effects of changes in
actuarial assumptions and plan provisions over a period no longer than the
average future service of employees.
Funding Policy. We fund
retiree health benefits on a pay-as-you-go basis. We expect to contribute
approximately $665 million in 2009 to fund such benefits. We fund retiree life
insurance benefits at our discretion.
Changes
in the accumulated postretirement benefit obligation for retiree benefit plans
follow.
Accumulated
Postretirement Benefit Obligation (APBO)
|
(In
millions)
|
2008
|
2007
|
||||
|
Balance
at January 1
|
$
|
12,983
|
$
|
8,262
|
||
|
Service
cost for benefits earned
|
326
|
286
|
||||
|
Interest
cost on benefit obligation
|
750
|
577
|
||||
|
Participant
contributions
|
51
|
47
|
||||
|
Plan
amendments(a)
|
–
|
4,257
|
||||
|
Actuarial
loss (gain)(b)
|
(1,351
|
)
|
320
|
|||
|
Benefits
paid(c)
|
(811
|
)
|
(796
|
)
|
||
|
Other
|
1
|
30
|
||||
|
Balance
at December 31(d)
|
$
|
11,949
|
$
|
12,983
|
||
|
(a)
|
For
2007, related to labor agreements negotiated with U.S.
unions.
|
|
(b)
|
For
2008, primarily related to benefits from new healthcare supplier
contracts.
|
|
(c)
|
Net
of Medicare Part D subsidy of $83 million and $73 million in 2008 and
2007, respectively.
|
|
(d)
|
The
APBO for the retiree health plans was $9,749 million and $10,847 million
at year-end 2008 and 2007,
respectively.
|
(87)
A one
percentage point change in the assumed healthcare cost trend rate would have the
following effects.
|
(In
millions)
|
1%
increase
|
1%
decrease
|
||||
|
APBO
at December 31, 2008
|
$
|
990
|
$
|
(848
|
)
|
|
|
Service
and interest cost in 2008
|
95
|
(80
|
)
|
|||
Fair
Value of Plan Assets
|
(In
millions)
|
2008
|
2007
|
||||
|
Balance
at January 1
|
$
|
1,804
|
$
|
1,710
|
||
|
Actual
gain (loss) on plan assets
|
(486
|
)
|
221
|
|||
|
Employer
contributions
|
617
|
622
|
||||
|
Participant
contributions
|
51
|
47
|
||||
|
Benefits
paid(a)
|
(811
|
)
|
(796
|
)
|
||
|
Balance
at December 31
|
$
|
1,175
|
$
|
1,804
|
||
|
(a)
|
Net
of Medicare Part D subsidy.
|
Plan
Asset Allocation
|
2008
|
2007
|
||||||||
|
December
31
|
Target
allocation
|
Actual
allocation
|
Actual
allocation
|
||||||
|
U.S.
equity securities
|
19-39
|
%
|
25
|
%
|
33
|
%
|
|||
|
Non-U.S.
equity securities
|
18-38
|
15
|
20
|
||||||
|
Debt
securities (including cash equivalents)
|
11-41
|
39
|
31
|
||||||
|
Real
estate
|
2-12
|
7
|
6
|
||||||
|
Private
equities
|
3-13
|
8
|
5
|
||||||
|
Other
|
0-10
|
6
|
5
|
||||||
Plan
fiduciaries set investment policies and strategies for the trust and oversee its
investment allocation, which includes selecting investment managers and setting
long-term strategic targets. Long-term strategic investment objectives include
preserving the funded status of the plan and balancing risk and return. Target
allocation ranges are guidelines, not limitations, and occasionally plan
fiduciaries will approve allocations above or below a target range.
Trust
assets invested in short-term securities must generally be invested in
securities rated A1/P1 or better, except for 15% of such securities that may be
rated A2/P2. According to statute, the aggregate holdings of all qualifying
employer securities (e.g., GE common stock) and qualifying employer real
property may not exceed 10% of the fair value of trust assets at the time of
purchase. GE securities represented 3.6% and 5.9% of trust assets at year-end
2008 and 2007, respectively.
(88)
Retiree
Benefit Asset (Liability)
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Funded
status(a)
|
$
|
(10,774
|
)
|
$
|
(11,179
|
)
|
|
Liability
recorded in the Statement of Financial Position
|
||||||
|
Retiree
health plans
|
||||||
|
Due
within one year
|
$
|
(644
|
)
|
$
|
(675
|
)
|
|
Due
after one year
|
(9,105
|
)
|
(10,172
|
)
|
||
|
Retiree
life plans
|
(1,025
|
)
|
(332
|
)
|
||
|
Net
liability recognized
|
$
|
(10,774
|
)
|
$
|
(11,179
|
)
|
|
Amounts
recorded in shareowners’ equity (unamortized)
|
||||||
|
Prior
service cost
|
$
|
5,027
|
$
|
5,700
|
||
|
Net
actuarial loss (gain)
|
(475
|
)
|
210
|
|||
|
Total
|
$
|
4,552
|
$
|
5,910
|
||
|
(a)
|
Fair
value of assets less APBO, as shown in the preceding
tables.
|
In 2009,
we estimate that we will amortize $675 million of prior service cost and $105
million of net actuarial gain from shareowners’ equity into retiree benefit
plans cost. Comparable amortized amounts in 2008 were $673 million of prior
service cost and $49 million of net actuarial gains.
Estimated
Future Benefit Payments
|
(In
millions)
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014-
2018
|
||||||||||||
|
Gross
|
$
|
910
|
$
|
930
|
$
|
965
|
$
|
980
|
$
|
1,000
|
$
|
5,200
|
||||||
|
Expected
Medicare
|
||||||||||||||||||
|
Part
D subsidy
|
75
|
80
|
85
|
90
|
95
|
550
|
||||||||||||
|
Net
|
$
|
835
|
$
|
850
|
$
|
880
|
$
|
890
|
$
|
905
|
$
|
4,650
|
Pension
Benefits
We
sponsor a number of pension plans. Principal pension plans, together with
affiliate and certain other pension plans (other pension plans) detailed in this
note, represent about 99% of our total pension assets. We use a December 31
measurement date for our plans.
Principal Pension Plans are
the GE Pension Plan and the GE Supplementary Pension Plan.
The GE
Pension Plan provides benefits to certain U.S. employees based on the greater of
a formula recognizing career earnings or a formula recognizing length of service
and final average earnings. Certain benefit provisions are subject to collective
bargaining.
The GE
Supplementary Pension Plan is an unfunded plan providing supplementary
retirement benefits primarily to higher-level, longer-service U.S.
employees.
Other Pension Plans in 2008
included 31 U.S. and non-U.S. pension plans with pension assets or obligations
greater than $50 million. These defined benefit plans provide benefits to
employees based on formulas recognizing length of service and
earnings.
(89)
Pension
Plan Participants
|
December
31, 2008
|
Total
|
Principal
pension
plans
|
Other
pension
plans
|
||||||
|
Active
employees
|
188,000
|
140,000
|
48,000
|
||||||
|
Vested
former employees
|
231,000
|
190,000
|
41,000
|
||||||
|
Retirees
and beneficiaries
|
246,000
|
220,000
|
26,000
|
||||||
|
Total
|
665,000
|
550,000
|
115,000
|
||||||
Cost
Of Pension Plans
|
Total
|
Principal
pension plans
|
Other
pension plans
|
|||||||||||||||||||||||||
|
(In
millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Expected
return on plan assets
|
$
|
(4,850
|
)
|
$
|
(4,459
|
)
|
$
|
(4,211
|
)
|
$
|
(4,298
|
)
|
$
|
(3,950
|
)
|
$
|
(3,811
|
)
|
$
|
(552
|
)
|
$
|
(509
|
)
|
$
|
(400
|
)
|
|
Service
cost for benefits earned
|
1,663
|
1,727
|
1,719
|
1,331
|
1,355
|
1,402
|
332
|
372
|
317
|
||||||||||||||||||
|
Interest
cost on benefit obligation
|
3,152
|
2,885
|
2,685
|
2,653
|
2,416
|
2,304
|
499
|
469
|
381
|
||||||||||||||||||
|
Prior
service cost amortization
|
332
|
247
|
258
|
321
|
241
|
253
|
11
|
6
|
5
|
||||||||||||||||||
|
Net
actuarial loss amortization
|
316
|
856
|
893
|
237
|
693
|
729
|
79
|
163
|
164
|
||||||||||||||||||
|
Pension
plans cost
|
$
|
613
|
$
|
1,256
|
$
|
1,344
|
$
|
244
|
$
|
755
|
$
|
877
|
$
|
369
|
$
|
501
|
$
|
467
|
|||||||||
Actuarial assumptions are
described below. The discount rates at December 31 measured the year-end benefit
obligations and the earnings effects for the subsequent year.
|
Principal
pension plans
|
Other
pension plans (weighted average)
|
|||||||||||||||||||||||
|
December
31
|
2008
|
2007
|
2006
|
2005
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Discount
rate
|
6.11
|
%
|
6.34
|
%
|
5.75
|
%
|
5.50
|
%
|
6.03
|
%
|
5.65
|
%
|
4.97
|
%
|
4.74
|
%
|
||||||||
|
Compensation
increases
|
4.20
|
5.00
|
5.00
|
5.00
|
4.47
|
4.50
|
4.26
|
4.20
|
||||||||||||||||
|
Expected
return on assets
|
8.50
|
8.50
|
8.50
|
8.50
|
7.41
|
7.51
|
7.44
|
7.47
|
||||||||||||||||
To
determine the expected long-term rate of return on pension plan assets, we
consider current and expected asset allocations, as well as historical and
expected returns on various categories of plan assets. For the principal pension
plans, we apply our expected rate of return to a market-related value of assets,
which stabilizes variability in the amounts to which we apply that expected
return.
We
amortize experience gains and losses as well as the effects of changes in
actuarial assumptions and plan provisions over a period no longer than the
average future service of employees.
Funding policy for the GE
Pension Plan is to contribute amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws plus such additional
amounts as we may determine to be appropriate. We have not made contributions to
the GE Pension Plan since 1987 and will not make any such contributions in 2009.
In 2009, we expect to pay approximately $170 million for benefit payments under
our GE Supplementary Pension Plan and administrative expenses of our principal
pension plans and expect to contribute approximately $690 million to other
pension plans. In 2008, comparative amounts were $153 million and $627 million,
respectively.
Benefit obligations are
described in the following tables. Accumulated and projected benefit obligations
(ABO and PBO) represent the obligations of a pension plan for past service as of
the measurement date. ABO is the present value of benefits earned to date with
benefits computed based on current compensation levels. PBO is ABO increased to
reflect expected future compensation.
(90)
Projected
Benefit Obligation
|
Principal
pension
plans
|
Other
pension
plans
|
|||||||||||
|
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Balance
at January 1
|
$
|
42,947
|
$
|
43,293
|
$
|
9,014
|
$
|
9,034
|
||||
|
Service
cost for benefits earned
|
1,331
|
1,355
|
332
|
372
|
||||||||
|
Interest
cost on benefit obligations
|
2,653
|
2,416
|
499
|
469
|
||||||||
|
Participant
contributions
|
169
|
173
|
40
|
43
|
||||||||
|
Plan
amendments
|
–
|
1,470
|
16
|
26
|
||||||||
|
Actuarial
loss (gain)(a)
|
791
|
(3,205
|
)
|
(923
|
)
|
(665
|
)
|
|||||
|
Benefits
paid
|
(2,723
|
)
|
(2,555
|
)
|
(383
|
)
|
(370
|
)
|
||||
|
Acquisitions
(dispositions) – net
|
–
|
–
|
545
|
(311
|
)
|
|||||||
|
Exchange
rate adjustments
|
–
|
–
|
(1,392
|
)
|
416
|
|||||||
|
Balance
at December 31(b)
|
$
|
45,168
|
$
|
42,947
|
$
|
7,748
|
$
|
9,014
|
||||
|
(a)
|
Principally
associated with discount rate changes.
|
|
(b)
|
The
PBO for the GE Supplementary Pension Plan, which is an unfunded plan, was
$3,505 million and $3,437 million at year-end 2008 and 2007,
respectively.
|
Accumulated
Benefit Obligation
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
GE
Pension Plan
|
$
|
40,313
|
$
|
38,155
|
||
|
GE
Supplementary Pension Plan
|
2,582
|
2,292
|
||||
|
Other
pension plans
|
7,075
|
8,175
|
Plans
With Assets Less Than ABO
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Funded
plans with assets less than ABO
|
||||||
|
Plan
assets
|
$
|
4,914
|
$
|
3,639
|
||
|
Accumulated
benefit obligations
|
5,888
|
3,974
|
||||
|
Projected
benefit obligations
|
6,468
|
4,595
|
||||
|
Unfunded
plans(a)
|
||||||
|
Accumulated
benefit obligations
|
3,352
|
3,111
|
||||
|
Projected
benefit obligations
|
4,303
|
4,283
|
||||
|
(a)
|
Primarily
related to the GE Supplementary Pension
Plan.
|
Fair
Value of Plan Assets
|
Principal
pension
plans
|
Other
pension
plans
|
|||||||||||
|
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Balance
at January 1
|
$
|
59,700
|
$
|
54,758
|
$
|
7,411
|
$
|
6,435
|
||||
|
Actual
gain (loss) on plan assets
|
(16,569
|
)
|
7,188
|
(1,743
|
)
|
614
|
||||||
|
Employer
contributions
|
153
|
136
|
627
|
730
|
||||||||
|
Participant
contributions
|
169
|
173
|
40
|
43
|
||||||||
|
Benefits
paid
|
(2,723
|
)
|
(2,555
|
)
|
(383
|
)
|
(370
|
)
|
||||
|
Acquisitions
(dispositions) – net
|
–
|
–
|
565
|
(372
|
)
|
|||||||
|
Exchange
rate adjustments
|
–
|
–
|
(1,143
|
)
|
331
|
|||||||
|
Balance
at December 31
|
$
|
40,730
|
$
|
59,700
|
$
|
5,374
|
$
|
7,411
|
||||
(91)
Plan
Asset Allocation
|
Principal
pension plans
|
|||||||||
|
2008
|
2007
|
||||||||
|
December
31
|
Target
allocation
|
Actual
allocation
|
Actual
allocation
|
||||||
|
U.S.
equity securities
|
17-37
|
%
|
25
|
%
|
32
|
%
|
|||
|
Non-U.S.
equity securities
|
17-37
|
14
|
20
|
||||||
|
Debt
securities (including cash equivalents)
|
10-40
|
31
|
24
|
||||||
|
Real
estate
|
4-14
|
12
|
9
|
||||||
|
Private
equities
|
5-15
|
12
|
9
|
||||||
|
Other
|
1-14
|
6
|
6
|
||||||
Plan
fiduciaries of the GE Pension Plan set investment policies and strategies for
the GE Pension Trust and oversee its investment allocation, which includes
selecting investment managers, commissioning periodic asset-liability studies
and setting long-term strategic targets. Long-term strategic investment
objectives include preserving the funded status of the plan and balancing risk
and return. Target allocation ranges are guidelines, not limitations, and
occasionally plan fiduciaries will approve allocations above or below a target
range.
GE
Pension Trust assets are invested subject to the following additional
guidelines:
|
·
|
Short-term
securities must generally be rated A1/P1 or better, except for 15% of such
securities that may be rated A2/P2.
|
|
·
|
Real
estate investments may not exceed 25% of total
assets.
|
|
·
|
Investments
in restricted securities that are not freely tradable may not exceed 30%
of total assets (actual was 16% of trust assets at December 31,
2008).
|
According
to statute, the aggregate holdings of all qualifying employer securities (e.g.,
GE common stock) and qualifying employer real property may not exceed 10% of the
fair value of trust assets at the time of purchase. GE securities represented
3.5% and 5.6% of trust assets at year-end 2008 and 2007,
respectively.
|
Other
pension plans
(weighted
average)
|
|||||||||
|
2008
|
2007
|
||||||||
|
December
31
|
Target
allocation
|
Actual
allocation
|
Actual
allocation
|
||||||
|
Equity
securities
|
60
|
%
|
57
|
%
|
67
|
%
|
|||
|
Debt
securities
|
30
|
32
|
25
|
||||||
|
Real
estate
|
4
|
4
|
4
|
||||||
|
Other
|
6
|
7
|
4
|
||||||
(92)
Pension
Asset (Liability)
|
Principal
pension
plans
|
Other
pension
plans
|
|||||||||||
|
December
31 (In millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Funded
status(a)
|
$
|
(4,438
|
)
|
$
|
16,753
|
$
|
(2,374
|
)
|
$
|
(1,603
|
)
|
|
|
Pension
asset (liability) recorded in the
|
||||||||||||
|
Statement
of Financial Position
|
||||||||||||
|
Pension
asset
|
$
|
–
|
$
|
20,190
|
$
|
9
|
$
|
258
|
||||
|
Pension
liabilities
|
||||||||||||
|
Due
within one year(b)
|
(117
|
)
|
(111
|
)
|
(51
|
)
|
(54
|
)
|
||||
|
Due
after one year(b)
|
(4,321
|
)
|
(3,326
|
)
|
(2,332
|
)
|
(1,807
|
)
|
||||
|
Net
amount recognized
|
$
|
(4,438
|
)
|
$
|
16,753
|
$
|
(2,374
|
)
|
$
|
(1,603
|
)
|
|
|
Amounts
recorded in shareowners’
|
||||||||||||
|
equity
(unamortized)
|
||||||||||||
|
Prior
service cost
|
$
|
1,739
|
$
|
2,060
|
$
|
62
|
$
|
65
|
||||
|
Net
actuarial loss (gain)
|
16,447
|
(4,974
|
)
|
1,753
|
654
|
|||||||
|
Total
|
$
|
18,186
|
$
|
(2,914
|
)
|
$
|
1,815
|
$
|
719
|
|||
|
(a)
|
Fair
value of assets less PBO, as shown in the preceding
tables.
|
|
(b)
|
For
principal pension plans, primarily represents the GE Supplementary Pension
Plan liability.
|
In 2009,
we estimate that we will amortize $323 million of prior service cost and $377
million of net actuarial loss for the principal pension plans from shareowners’
equity into pension cost. For other pension plans, the estimated prior service
cost and net actuarial loss to be amortized over the next fiscal year are $10
million and $125 million, respectively. Comparable amortized amounts in 2008,
respectively, were $321 million and $237 million for principal pension plans and
$11 million and $79 million for other pension plans.
Estimated
Future Benefit Payments
|
(In
millions)
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014-
2018
|
||||||||||||
|
Principal
pension
|
||||||||||||||||||
|
plans
|
$
|
2,725
|
$
|
2,800
|
$
|
2,850
|
$
|
2,925
|
$
|
2,950
|
$
|
16,050
|
||||||
|
Other
pension
|
||||||||||||||||||
|
plans
|
345
|
350
|
360
|
370
|
375
|
2,105
|
(93)
Postretirement
Benefit Plans
2008
Cost of Postretirement Benefit Plans and Changes in Equity Other Than
Transactions With Shareowners
|
(In
millions)
|
Total
post-
retirement
benefit
plans
|
Retiree
benefit
plans
|
Principal
pension
plans
|
Other
pension
plans
|
||||||||
|
Cost
of postretirement benefit plans
|
$
|
2,182
|
$
|
1,569
|
$
|
244
|
$
|
369
|
||||
|
Changes
in equity other than transactions
|
||||||||||||
|
with
shareowners
|
||||||||||||
|
Net
actuarial loss (gain) – current year
|
$
|
22,094
|
$
|
(734
|
)
|
$
|
21,658
|
$
|
1,170
|
|||
|
Prior
service cost – current year
|
16
|
–
|
–
|
16
|
||||||||
|
Prior
service cost amortization
|
(1,005
|
)
|
(673
|
)
|
(321
|
)
|
(11
|
)
|
||||
|
Net
actuarial gain (loss) amortization
|
(267
|
)
|
49
|
(237
|
)
|
(79
|
)
|
|||||
|
Total
changes in equity other than transactions
|
||||||||||||
|
with
shareowners
|
20,838
|
(1,358
|
)
|
21,100
|
1,096
|
|||||||
|
Cost
of postretirement benefit plans and changes in
|
||||||||||||
|
equity
other than transactions with shareowners
|
$
|
23,020
|
$
|
211
|
$
|
21,344
|
$
|
1,465
|
||||
NOTE
7. PROVISION FOR INCOME TAXES
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
|
|||||||||
|
Current
tax expense
|
$
|
3,844
|
$
|
2,230
|
$
|
1,849
|
|||
|
Deferred
tax expense (benefit) from temporary differences
|
(417
|
)
|
564
|
703
|
|||||
|
3,427
|
2,794
|
2,552
|
|||||||
|
GECS
|
|||||||||
|
Current
tax expense (benefit)
|
(1,508
|
)
|
1,268
|
456
|
|||||
|
Deferred
tax expense (benefit) from temporary differences
|
(867
|
)
|
93
|
936
|
|||||
|
(2,375
|
)
|
1,361
|
1,392
|
||||||
|
Consolidated
|
|||||||||
|
Current
tax expense
|
2,336
|
3,498
|
2,305
|
||||||
|
Deferred
tax expense (benefit) from temporary differences
|
(1,284
|
)
|
657
|
1,639
|
|||||
|
Total
|
$
|
1,052
|
$
|
4,155
|
$
|
3,944
|
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.
Consolidated
U.S. earnings from continuing operations before income taxes were $2,259 million
in 2008, $8,449 million in 2007 and $10,154 million in 2006. The corresponding
amounts for non-U.S.-based operations were $16,882 million in 2008, $18,163
million in 2007 and $13,134 million in 2006.
Consolidated
current tax expense includes amounts applicable to U.S. federal income taxes of
a benefit of $723 million in 2008, and expenses of $64 million and $530 million
in 2007 and 2006, respectively, and amounts applicable to non-U.S. jurisdictions
of $3,060 million, $3,042 million and $1,549 million in 2008, 2007 and 2006,
respectively. Consolidated deferred taxes related to U.S. federal income taxes
were a benefit of $827 million in 2008 and expenses of $776 million and $1,529
million in 2007 and 2006, respectively.
(94)
Deferred
income tax balances reflect the effects of temporary differences between the
carrying amounts of assets and liabilities and their tax bases, as well as from
net operating loss and tax credit carryforwards, and are stated at enacted tax
rates expected to be in effect when taxes are actually paid or recovered.
Deferred income tax assets represent amounts available to reduce income taxes
payable on taxable income in future years. We evaluate the recoverability of
these future tax deductions and credits by assessing the adequacy of future
expected taxable income from all sources, including reversal of taxable
temporary differences, forecasted operating earnings and available tax planning
strategies. To the extent we do not consider it more likely than not that a
deferred tax asset will be recovered, a valuation allowance is established. See
Note 21.
Our
businesses are subject to regulation under a wide variety of U.S. federal, state
and foreign tax laws, regulations and policies. Changes to these laws or
regulations may affect our tax liability, return on investments and business
operations. For example, GE’s effective tax rate is reduced because active
business income earned and indefinitely reinvested outside the United States is
taxed at less than the U.S. rate. A significant portion of this reduction
depends upon a provision of U.S. tax law that defers the imposition of U.S. tax
on certain active financial services income until that income is repatriated to
the United States as a dividend. This provision is consistent with international
tax norms and permits U.S. financial services companies to compete more
effectively with foreign banks and other foreign financial institutions in
global markets. This provision, currently scheduled to expire at the end of
2009, has been scheduled to expire on five previous occasions, including October
of 2008, but there can be no assurance that it will continue to be extended. In
the event this provision is not extended after 2009, the current U.S. tax
imposed on active financial services income earned outside the United States
would increase, making it more difficult for U.S. financial services companies
to compete in global markets. If this provision is not extended, we expect our
effective tax rate to increase significantly after 2010.
We have
not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates
and associated companies that have been reinvested indefinitely. These earnings
relate to ongoing operations and, at December 31, 2008, were approximately $75
billion. Most of these earnings have been reinvested in active non-U.S. business
operations and we do not intend to use these earnings as a source of funding for
U.S. operations. Because of the availability of U.S. foreign tax credits, it is
not practicable to determine the U.S. federal income tax liability that would be
payable if such earnings were not reinvested indefinitely. Deferred taxes are
provided for earnings of non-U.S. affiliates and associated companies when we
plan to remit those earnings. During 2008, because the use of foreign tax
credits no longer required the repatriation of prior-year earnings, we increased
the amount of prior-year earnings that were indefinitely reinvested outside the
U.S. by approximately $1.0 billion, resulting in a decrease to the income tax
provision of approximately $350 million.
As
discussed in Note 1, on January 1, 2007, we adopted a new accounting standard,
FIN 48, Accounting for
Uncertainty in Income Taxes, resulting in a $49 million decrease in
retained earnings, an $89 million decrease in goodwill and a $40 million
decrease in income tax liability.
Annually,
we file over 7,500 income tax returns in over 250 global taxing jurisdictions.
We are under examination or engaged in tax litigation in many of these
jurisdictions. During 2007, the IRS completed the audit of our consolidated U.S.
income tax returns for 2000-2002. The IRS is currently auditing our consolidated
U.S. 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.
(95)
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:
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Unrecognized
tax benefits
|
$
|
6,692
|
$
|
6,331
|
||
|
Portion
that, if recognized, would reduce tax expense and effective tax rate(a)
|
4,453
|
4,268
|
||||
|
Accrued
interest on unrecognized tax benefits
|
1,204
|
923
|
||||
|
Accrued
penalties on unrecognized tax benefits
|
96
|
77
|
||||
|
Reasonably
possible reduction to the balance of unrecognized
tax benefits
|
||||||
|
in
succeeding 12 months
|
0-1,500
|
0-1,500
|
||||
|
Portion
that, if recognized, would reduce tax expense and effective tax rate(a)
|
0-1,100
|
0-1,250
|
||||
|
(a)
|
Some
portion of such reduction might be reported as discontinued
operations.
|
A
reconciliation of the beginning and ending amounts of unrecognized tax benefits
is as follows:
|
(In
millions)
|
2008
|
2007
|
||||
|
Balance
at January 1
|
$
|
6,331
|
$
|
6,806
|
||
|
Additions
for tax positions of the current year
|
553
|
434
|
||||
|
Additions
for tax positions of prior years
|
516
|
1,439
|
||||
|
Reductions
for tax positions of prior years
|
(489
|
)
|
(1,939
|
)
|
||
|
Settlements
with tax authorities
|
(173
|
)
|
(330
|
)
|
||
|
Expiration
of the statute of limitations
|
(46
|
)
|
(79
|
)
|
||
|
Balance
at December 31
|
$
|
6,692
|
$
|
6,331
|
We
classify interest on tax deficiencies as interest expense; we classify income
tax penalties as provision for income taxes. For the year ended December 31,
2008, $268 million of interest expense and $19 million of tax expense related to
penalties were recognized in the statement of earnings, compared with $(279)
million and $(34) million for the year ended December 31, 2007.
A
reconciliation of the U.S. federal statutory income tax rate to the actual
income tax rate is provided below.
Reconciliation
of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
|
Consolidated
|
GE
|
GECS
|
|||||||||||||||||||||||||
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
|||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||||
|
U.S.
federal statutory income tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
|||||||||
|
Increase
(reduction) in rate resulting from
|
|||||||||||||||||||||||||||
|
Inclusion
of after-tax earnings of GECS
|
|||||||||||||||||||||||||||
|
in
before-tax earnings of GE
|
–
|
–
|
–
|
(12.6
|
)
|
(17.2
|
)
|
(16.3
|
)
|
–
|
–
|
–
|
|||||||||||||||
|
Tax on global activities including
exports(a)
|
(26.9
|
)
|
(15.6
|
)
|
(16.7
|
)
|
(5.3
|
)
|
(5.0
|
)
|
(6.5
|
)
|
(74.4
|
)
|
(21.0
|
)
|
(21.1
|
)
|
|||||||||
|
U.S.
business credits
|
(1.5
|
)
|
(1.1
|
)
|
(1.4
|
)
|
(0.4
|
)
|
(0.3
|
)
|
(0.4
|
)
|
(3.8
|
)
|
(1.5
|
)
|
(2.2
|
)
|
|||||||||
|
SES
transaction
|
–
|
(2.1
|
)
|
–
|
–
|
–
|
–
|
–
|
(4.0
|
)
|
–
|
||||||||||||||||
|
All
other – net
|
(1.1
|
)
|
(0.6
|
)
|
–
|
(0.8
|
)
|
(1.4
|
)
|
(0.1
|
)
|
(0.8
|
)
|
1.4
|
0.3
|
||||||||||||
|
(29.5
|
)
|
(19.4
|
)
|
(18.1
|
)
|
(19.1
|
)
|
(23.9
|
)
|
(23.3
|
)
|
(79.0
|
)
|
(25.1
|
)
|
(23.0
|
)
|
||||||||||
|
Actual
income tax rate
|
5.5
|
%
|
15.6
|
%
|
16.9
|
%
|
15.9
|
%
|
11.1
|
%
|
11.7
|
%
|
(44.0
|
)%
|
9.9
|
%
|
12.0
|
%
|
|||||||||
|
(a)
|
2008
included (1.8)% and (6.5)% from indefinite reinvestment of prior-year
earnings for consolidated and GECS,
respectively.
|
(96)
NOTE
8. EARNINGS PER SHARE INFORMATION
|
2008
|
2007
|
2006
|
||||||||||||||||
|
(In
millions; per-share amounts in dollars)
|
Diluted
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Basic
|
||||||||||||
|
Consolidated
|
||||||||||||||||||
|
Earnings
from continuing operations for per-share calculation(a)
|
$
|
18,091
|
$
|
18,089
|
$
|
22,457
|
$
|
22,457
|
$
|
19,345
|
$
|
19,344
|
||||||
|
Preferred
stock dividends declared
|
(75
|
)
|
(75
|
)
|
–
|
–
|
–
|
–
|
||||||||||
|
Earnings
from continuing operations attributable to
|
||||||||||||||||||
|
common
shareowners for per-share calculation
|
$
|
18,016
|
$
|
18,014
|
$
|
22,457
|
$
|
22,457
|
$
|
19,345
|
$
|
19,344
|
||||||
|
Earnings
(loss) from discontinued operations for
|
||||||||||||||||||
|
per-share
calculation
|
(679
|
)
|
(679
|
)
|
(249
|
)
|
(249
|
)
|
1,399
|
1,398
|
||||||||
|
Net
earnings attributable to common shareowners
|
||||||||||||||||||
|
for
per-share calculation
|
17,336
|
17,335
|
22,208
|
22,208
|
20,744
|
20,742
|
||||||||||||
|
Average
equivalent shares
|
||||||||||||||||||
|
Shares
of GE common stock outstanding
|
10,080
|
10,080
|
10,182
|
10,182
|
10,359
|
10,359
|
||||||||||||
|
Employee
compensation-related shares, including stock options
|
18
|
–
|
36
|
–
|
35
|
–
|
||||||||||||
|
Total
average equivalent shares
|
10,098
|
10,080
|
10,218
|
10,182
|
10,394
|
10,359
|
||||||||||||
|
Per-share
amounts
|
||||||||||||||||||
|
Earnings
from continuing operations
|
$
|
1.78
|
$
|
1.79
|
$
|
2.20
|
$
|
2.21
|
$
|
1.86
|
$
|
1.87
|
||||||
|
Earnings
(loss) from discontinued operations
|
(0.07
|
)
|
(0.07
|
)
|
(0.02
|
)
|
(0.02
|
)
|
0.13
|
0.14
|
||||||||
|
Net
earnings per share
|
1.72
|
1.72
|
2.17
|
2.18
|
2.00
|
2.00
|
||||||||||||
|
(a)
|
Included
an insignificant amount of dividend equivalents in each of the three years
ended December 31, 2008.
|
Earnings-per-share
amounts are computed independently for earnings from continuing operations,
earnings (loss) from discontinued operations and net earnings. As a result, the
sum of per-share amounts from continuing operations and discontinued operations
may not equal the total per-share amounts for net earnings.
(97)
NOTE
9. INVESTMENT SECURITIES
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.
|
2008
|
2007
|
|||||||||||||||||||||||
|
December
31 (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
|
$
|
182
|
$
|
–
|
$
|
–
|
$
|
182
|
$
|
301
|
$
|
23
|
$
|
–
|
$
|
324
|
||||||||
|
Equity
– available-for-sale
|
32
|
–
|
(1
|
)
|
31
|
21
|
3
|
(5
|
)
|
19
|
||||||||||||||
|
214
|
–
|
(1
|
)
|
213
|
322
|
26
|
(5
|
)
|
343
|
|||||||||||||||
|
GECS
|
||||||||||||||||||||||||
|
Debt
|
||||||||||||||||||||||||
|
U.S.
corporate
|
22,183
|
512
|
(2,477
|
)
|
20,218
|
21,896
|
725
|
(669
|
)
|
21,952
|
||||||||||||||
|
State
and municipal
|
1,556
|
19
|
(94
|
)
|
1,481
|
1,106
|
28
|
(8
|
)
|
1,126
|
||||||||||||||
|
Residential
mortgage-
|
||||||||||||||||||||||||
|
backed(a)
|
5,326
|
70
|
(1,052
|
)
|
4,344
|
5,677
|
22
|
(225
|
)
|
5,474
|
||||||||||||||
|
Commercial
mortgage-backed
|
2,910
|
14
|
(788
|
)
|
2,136
|
2,930
|
15
|
(49
|
)
|
2,896
|
||||||||||||||
|
Asset-backed
|
2,881
|
1
|
(691
|
)
|
2,191
|
2,307
|
3
|
(89
|
)
|
2,221
|
||||||||||||||
|
Corporate
– non-U.S.
|
1,441
|
14
|
(166
|
)
|
1,289
|
1,489
|
47
|
(11
|
)
|
1,525
|
||||||||||||||
|
Government
– non-U.S.
|
1,300
|
61
|
(19
|
)
|
1,342
|
1,082
|
70
|
(10
|
)
|
1,142
|
||||||||||||||
|
U.S.
government and federal
|
||||||||||||||||||||||||
|
agency
|
739
|
65
|
(100
|
)
|
704
|
832
|
55
|
(37
|
)
|
850
|
||||||||||||||
|
Retained interests(b)(c)
|
6,395
|
113
|
(152
|
)
|
6,356
|
5,579
|
178
|
(57
|
)
|
5,700
|
||||||||||||||
|
Equity
|
||||||||||||||||||||||||
|
Available-for-sale
|
921
|
26
|
(160
|
)
|
787
|
1,524
|
265
|
(120
|
)
|
1,669
|
||||||||||||||
|
Trading
|
388
|
–
|
–
|
388
|
386
|
–
|
–
|
386
|
||||||||||||||||
|
46,040
|
895
|
(5,699
|
)
|
41,236
|
44,808
|
1,408
|
(1,275
|
)
|
44,941
|
|||||||||||||||
|
Eliminations
|
(7
|
)
|
–
|
4
|
(3
|
)
|
(7
|
)
|
(1
|
)
|
–
|
(8
|
)
|
|||||||||||
|
Total
|
$
|
46,247
|
$
|
895
|
$
|
(5,696
|
)
|
$
|
41,446
|
$
|
45,123
|
$
|
1,433
|
$
|
(1,280
|
)
|
$
|
45,276
|
||||||
|
(a)
|
Substantially
collateralized by U.S. mortgages.
|
|
(b)
|
Included
$1,752 million and $2,227 million of retained interests at December 31,
2008 and 2007, respectively, accounted for in accordance with SFAS 155,
Accounting for Certain
Hybrid Financial Instruments. See Note 30.
|
|
(c)
|
Amortized
cost and estimated fair value included $20 million and $25 million of
trading securities at December 31, 2008 and 2007,
respectively.
|
(98)
The
following tables present the gross unrealized losses and estimated fair values
of our available-for-sale investment securities.
|
In
loss position for
|
||||||||||||
|
Less
than 12 months
|
12
months or more
|
|||||||||||
|
December
31 (In millions)
|
Estimated
fair
value
|
Gross
unrealized
losses
|
Estimated
fair
value
|
Gross
unrealized
losses
|
||||||||
|
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
|
)
|
||
|
2007
|
||||||||||||
|
Debt
|
||||||||||||
|
U.S.
corporate
|
$
|
5,766
|
$
|
(274
|
)
|
$
|
4,341
|
$
|
(395
|
)
|
||
|
State
and municipal
|
198
|
(3
|
)
|
131
|
(5
|
)
|
||||||
|
Residential
mortgage-backed
|
3,268
|
(160
|
)
|
1,223
|
(65
|
)
|
||||||
|
Commercial
mortgage-backed
|
1,483
|
(33
|
)
|
848
|
(16
|
)
|
||||||
|
Asset-backed
|
1,417
|
(62
|
)
|
478
|
(27
|
)
|
||||||
|
Corporate
– non-U.S.
|
505
|
(8
|
)
|
124
|
(3
|
)
|
||||||
|
Government
– non-U.S.
|
29
|
(1
|
)
|
311
|
(9
|
)
|
||||||
|
U.S.
government and federal agency
|
255
|
(37
|
)
|
–
|
–
|
|||||||
|
Retained
interests
|
548
|
(50
|
)
|
10
|
(7
|
)
|
||||||
|
Equity
|
443
|
(105
|
)
|
18
|
(20
|
)
|
||||||
|
Total
|
$
|
13,912
|
$
|
(733
|
)
|
$
|
7,484
|
$
|
(547
|
)
|
||
Investment
securities amounted to $41,446 million at December 31, 2008, compared with
$45,276 million at December 31, 2007. Most of our investment securities relate
to our run-off insurance operations and our issuances of guaranteed investment
contracts.
Of our
residential mortgage-backed securities (RMBS) at December 31, 2008, we had
approximately $1,310 million 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, $1,093 million 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 was investment securities with
underlying loans originated in 2006 and 2005. At December 31, 2008, we had
approximately $2,853 million of exposure to commercial, regional and foreign
banks, primarily relating to corporate debt securities, with associated
unrealized losses of $373 million.
We
presently intend to hold our investment securities that are in an unrealized
loss position at December 31, 2008, at least until we can recover their
respective amortized cost. We have the ability to hold our debt securities until
their maturities. 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.
(99)
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
|
||||||
|
2009
|
$
|
1,820
|
$
|
1,777
|
||
|
2010–2013
|
4,999
|
4,634
|
||||
|
2014–2018
|
3,841
|
3,366
|
||||
|
2019
and later
|
16,559
|
15,257
|
||||
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.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
|
|||||||||
|
Gains
|
$
|
–
|
$
|
5
|
$
|
125
|
|||
|
Losses,
including impairments
|
(148
|
)
|
–
|
(1
|
)
|
||||
|
Net
|
(148
|
)
|
5
|
124
|
|||||
|
GECS
|
|||||||||
|
Gains(a)
|
212
|
1,026
|
313
|
||||||
|
Losses,
including impairments
|
(1,472
|
)
|
(141
|
)
|
(181
|
)
|
|||
|
Net
|
(1,260
|
)
|
885
|
132
|
|||||
|
Total
|
$
|
(1,408
|
)
|
$
|
890
|
$
|
256
|
||
|
(a)
|
Included
gain on sale of Swiss Re common stock of $566 million in
2007.
|
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 amounted to $5,239 million, $18,993 million and
$12,394 million in 2008, 2007 and 2006, respectively, principally from the
short-term nature of the investments that support the guaranteed investment
contracts portfolio and the 2007 sale of Swiss Re common stock.
We
recognized pre-tax gains on trading securities of $108 million, $292 million and
$5 million in 2008, 2007 and 2006, respectively. Investments in retained
interests decreased by $113 million and $102 million during 2008 and 2007,
respectively, reflecting declines in fair value accounted for in accordance with
SFAS 155.
(100)
NOTE
10. CURRENT RECEIVABLES
|
Consolidated(a)
|
GE
|
|||||||||||
|
December
31 (In millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||
|
Energy
Infrastructure
|
$
|
7,403
|
$
|
7,065
|
$
|
6,409
|
$
|
5,934
|
||||
|
Technology
Infrastructure
|
9,214
|
9,149
|
5,687
|
5,443
|
||||||||
|
NBC
Universal
|
3,659
|
3,800
|
2,701
|
2,927
|
||||||||
|
Consumer
& Industrial
|
1,498
|
2,238
|
513
|
630
|
||||||||
|
Corporate
items and eliminations
|
296
|
526
|
381
|
642
|
||||||||
|
22,070
|
22,778
|
15,691
|
15,576
|
|||||||||
|
Less
allowance for losses
|
(659
|
)
|
(519
|
)
|
(627
|
)
|
(483
|
)
|
||||
|
Total
|
$
|
21,411
|
$
|
22,259
|
$
|
15,064
|
$
|
15,093
|
||||
|
(a)
|
Included
GE industrial customer receivables factored through a GECS affiliate and
reported as financing receivables by GECS. See Note
26.
|
GE
receivables balances at December 31, 2008 and 2007, before allowance for losses,
included $11,274 million and $11,008 million, respectively, from sales of goods
and services to customers, and $293 million and $381 million at December 31,
2008 and 2007, respectively, from transactions with associated
companies.
GE
current receivables of $231 million and $252 million at December 31, 2008 and
2007, respectively, arose from sales, principally of Aviation goods and services
on open account to various agencies of the U.S. government, our largest single
customer. About 5% of GE sales of goods and services were to the U.S. government
in 2008, compared with 4% in both 2007 and 2006.
NOTE
11. INVENTORIES
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
GE
|
||||||
|
Raw
materials and work in process
|
$
|
8,710
|
$
|
7,893
|
||
|
Finished
goods
|
5,032
|
5,025
|
||||
|
Unbilled
shipments
|
561
|
539
|
||||
|
14,303
|
13,457
|
|||||
|
Less
revaluation to LIFO
|
(706
|
)
|
(623
|
)
|
||
|
13,597
|
12,834
|
|||||
|
GECS
|
||||||
|
Finished
goods
|
77
|
63
|
||||
|
Total
|
$
|
13,674
|
$
|
12,897
|
NOTE
12. GECS FINANCING RECEIVABLES (INVESTMENTS IN LOANS AND FINANCING
LEASES)
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Loans,
net of deferred income
|
$
|
310,203
|
$
|
313,290
|
||
|
Investment
in financing leases, net of deferred income
|
67,578
|
75,015
|
||||
|
377,781
|
388,305
|
|||||
|
Less
allowance for losses (Note 13)
|
(5,325
|
)
|
(4,238
|
)
|
||
|
Financing
receivables – net
|
$
|
372,456
|
$
|
384,067
|
Included
in the above are $6,461 million and $9,708 million of the financing receivables
of consolidated, liquidating securitization entities at December 31, 2008 and
2007, respectively. In addition, financing receivables at December 31, 2008,
included $2,736 million 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.
(101)
Details
of GECS financing receivables – net follow.
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Commercial
Lending and Leasing (CLL)
|
||||||
|
Equipment
and leasing and other
|
$
|
99,769
|
$
|
96,817
|
||
|
Commercial
and industrial
|
64,332
|
58,863
|
||||
|
164,101
|
155,680
|
|||||
|
GE
Money
|
||||||
|
Non-U.S.
residential mortgages(a)
|
59,595
|
73,042
|
||||
|
Non-U.S.
installment and revolving credit
|
24,441
|
34,669
|
||||
|
U.S.
installment and revolving credit
|
27,645
|
27,914
|
||||
|
Non-U.S.
auto
|
18,168
|
27,368
|
||||
|
Other
|
9,244
|
10,198
|
||||
|
139,093
|
173,191
|
|||||
|
Real
Estate
|
46,735
|
32,228
|
||||
|
Energy
Financial Services
|
8,392
|
7,898
|
||||
|
GE Commercial Aviation Services
(GECAS)(b)
|
15,429
|
14,197
|
||||
|
Other(c)
|
4,031
|
5,111
|
||||
|
377,781
|
388,305
|
|||||
|
Less
allowance for losses
|
(5,325
|
)
|
(4,238
|
)
|
||
|
Total
|
$
|
372,456
|
$
|
384,067
|
||
|
(a)
|
At
December 31, 2008, net of credit insurance, approximately 26% 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.
|
|
(b)
|
Included
loans and financing leases of $13,078 million and $11,685 million at
December 31, 2008 and 2007, respectively, related to commercial aircraft
at Aviation Financial Services.
|
|
(c)
|
Included
loans and financing leases of $4,031 million and $5,106 million at
December 31, 2008 and 2007, respectively, related to certain consolidated,
liquidating securitization
entities.
|
GECS
financing receivables include both loans and financing leases. Loans represent
transactions in a variety of forms, including revolving charge and credit,
mortgages, installment loans, intermediate-term loans and revolving loans
secured by business assets. The portfolio includes loans carried at the
principal amount on which finance charges are billed periodically, and loans
carried at gross book value, which includes finance charges.
Investment
in financing leases consists of direct financing and leveraged leases of
aircraft, railroad rolling stock, autos, other transportation equipment, data
processing equipment, medical equipment, commercial real estate and other
manufacturing, power generation, and commercial equipment and
facilities.
For
federal income tax purposes, the leveraged leases and the majority of the direct
financing leases are leases in which GECS depreciates the leased assets and is
taxed upon the accrual of rental income. Certain direct financing leases are
loans for federal income tax purposes. For these transactions, GECS is taxable
only on the portion of each payment that constitutes interest, unless the
interest is tax-exempt (e.g., certain obligations of state
governments).
Investment
in direct financing and leveraged leases represents net unpaid rentals and
estimated unguaranteed residual values of leased equipment, less related
deferred income. GECS has no general obligation for principal and interest on
notes and other instruments representing third-party participation related to
leveraged leases; such notes and other instruments have not been included in
liabilities but have been offset against the related rentals receivable. The
GECS share of rentals receivable on leveraged leases is subordinate to the share
of other participants who also have security interests in the leased
equipment.
(102)
For
federal income tax purposes, GECS is entitled to deduct the interest expense
accruing on nonrecourse financing related to leveraged leases.
Net
Investment in Financing Leases
|
Total
financing
leases
|
Direct
financing
leases(a)
|
Leveraged
leases(b)
|
||||||||||||||||
|
December
31 (In millions)
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
|
Total
minimum lease payments
|
||||||||||||||||||
|
receivable
|
$
|
81,115
|
$
|
92,137
|
$
|
63,309
|
$
|
72,399
|
$
|
17,806
|
$
|
19,738
|
||||||
|
Less
principal and interest on
|
||||||||||||||||||
|
third-party
nonrecourse debt
|
(12,720
|
)
|
(14,102
|
)
|
–
|
–
|
(12,720
|
)
|
(14,102
|
)
|
||||||||
|
Net
rentals receivable
|
68,395
|
78,035
|
63,309
|
72,399
|
5,086
|
5,636
|
||||||||||||
|
Estimated
unguaranteed residual
|
||||||||||||||||||
|
value
of leased assets
|
10,255
|
10,306
|
7,425
|
7,500
|
2,830
|
2,806
|
||||||||||||
|
Less
deferred income
|
(11,072
|
)
|
(13,326
|
)
|
(8,733
|
)
|
(10,650
|
)
|
(2,339
|
)
|
(2,676
|
)
|
||||||
|
Investment
in financing leases,
|
||||||||||||||||||
|
net
of deferred income
|
67,578
|
75,015
|
62,001
|
69,249
|
5,577
|
5,766
|
||||||||||||
|
Less
amounts to arrive at net
|
||||||||||||||||||
|
investment
|
||||||||||||||||||
|
Allowance
for losses
|
(498
|
)
|
(571
|
)
|
(440
|
)
|
(559
|
)
|
(58
|
)
|
(12
|
)
|
||||||
|
Deferred
taxes
|
(7,317
|
)
|
(7,089
|
)
|
(3,082
|
)
|
(2,654
|
)
|
(4,235
|
)
|
(4,435
|
)
|
||||||
|
Net
investment in financing leases
|
$
|
59,763
|
$
|
67,355
|
$
|
58,479
|
$
|
66,036
|
$
|
1,284
|
$
|
1,319
|
||||||
|
(a)
|
Included
$824 million and $802 million of initial direct costs on direct financing
leases at December 31, 2008 and 2007, respectively.
|
|
(b)
|
Included
pre-tax income of $268 million and $412 million and income tax of $106
million and $156 million during 2008 and 2007, respectively. Net
investment credits recognized on leveraged leases during 2008 and 2007
were inconsequential.
|
Contractual
Maturities
|
(In
millions)
|
Total
loans
|
Net
rentals
receivable
|
||||
|
Due
in
|
||||||
|
2009
|
$
|
86,957
|
$
|
19,819
|
||
|
2010
|
36,970
|
13,725
|
||||
|
2011
|
30,902
|
10,624
|
||||
|
2012
|
26,421
|
7,150
|
||||
|
2013
|
21,624
|
4,752
|
||||
|
2014
and later
|
107,329
|
12,325
|
||||
|
Total
|
$
|
310,203
|
$
|
68,395
|
||
We
expect actual maturities to differ from contractual maturities.
(103)
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.
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Loans
requiring allowance for losses
|
$
|
2,712
|
$
|
986
|
||
|
Loans
expected to be fully recoverable
|
871
|
391
|
||||
|
Total
impaired loans
|
$
|
3,583
|
$
|
1,377
|
||
|
Allowance
for losses
|
$
|
635
|
$
|
361
|
||
|
Average
investment during year
|
2,064
|
1,576
|
||||
|
Interest
income earned while impaired(a)
|
27
|
19
|
||||
|
(a)
|
Recognized
principally on cash basis.
|
NOTE
13. GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
|
(In
millions)
|
Balance
January
1,
2008
|
Provision
charged
to
operations
|
Currency
exchange
|
Other(a)
|
Gross
write-offs
|
Recoveries
|
Balance
December
31,
2008
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
CLL
|
|||||||||||||||||||||||||||||
|
Equipment
and
|
|||||||||||||||||||||||||||||
|
leasing
and other
|
$
|
661
|
$
|
838
|
$
|
24
|
$
|
91
|
$
|
(815
|
)
|
$
|
95
|
$
|
894
|
||||||||||||||
|
Commercial
and
|
|||||||||||||||||||||||||||||
|
industrial
|
276
|
544
|
(12
|
)
|
4
|
(416
|
)
|
19
|
415
|
||||||||||||||||||||
|
GE
Money
|
|||||||||||||||||||||||||||||
|
Non-U.S.
residential
|
|||||||||||||||||||||||||||||
|
mortgages
|
246
|
323
|
(40
|
)
|
2
|
(218
|
)
|
69
|
382
|
||||||||||||||||||||
|
Non-U.S.
installment
|
|||||||||||||||||||||||||||||
|
and
revolving credit
|
1,371
|
1,748
|
(194
|
)
|
(223
|
)
|
(2,551
|
)
|
900
|
1,051
|
|||||||||||||||||||
|
U.S.
installment and
|
|||||||||||||||||||||||||||||
|
revolving
credit
|
985
|
3,217
|
–
|
(624
|
)
|
(2,173
|
)
|
295
|
1,700
|
||||||||||||||||||||
|
Non-U.S.
auto
|
324
|
376
|
(48
|
)
|
(76
|
)
|
(637
|
)
|
283
|
222
|
|||||||||||||||||||
|
Other
|
162
|
220
|
(17
|
)
|
28
|
(248
|
)
|
69
|
214
|
||||||||||||||||||||
|
Real
Estate
|
168
|
135
|
(7
|
)
|
16
|
(12
|
)
|
1
|
301
|
||||||||||||||||||||
|
Energy
Financial
|
|||||||||||||||||||||||||||||
|
Services
|
19
|
36
|
–
|
3
|
–
|
–
|
58
|
||||||||||||||||||||||
|
GECAS
|
8
|
53
|
–
|
–
|
(1
|
)
|
–
|
60
|
|||||||||||||||||||||
|
Other
|
18
|
28
|
–
|
–
|
(18
|
)
|
–
|
28
|
|||||||||||||||||||||
|
Total
|
$
|
4,238
|
$
|
7,518
|
$
|
(294
|
)
|
$
|
(779
|
)
|
$
|
(7,089
|
)
|
$
|
1,731
|
$
|
5,325
|
||||||||||||
|
(a)
|
Other
primarily included the effects of acquisitions, dispositions,
reclassifications to held for sale and securitization
activity.
|
(104)
|
(In
millions)
|
Balance
January
1,
2007
|
Provision
charged
to
operations
|
Currency
exchange
|
Other(a)
|
Gross
write-offs
|
Recoveries
|
Balance
December
31,
2007
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
CLL
|
||||||||||||||||||||||||||||||||
|
Equipment
and
|
||||||||||||||||||||||||||||||||
|
leasing
and other
|
$
|
427
|
$
|
309
|
$
|
25
|
$
|
207
|
$
|
(422
|
)
|
$
|
115
|
$
|
661
|
|||||||||||||||||
|
Commercial
and
|
||||||||||||||||||||||||||||||||
|
industrial
|
314
|
192
|
10
|
(36
|
)
|
(230
|
)
|
26
|
276
|
|||||||||||||||||||||||
|
GE
Money
|
||||||||||||||||||||||||||||||||
|
Non-U.S.
residential
|
||||||||||||||||||||||||||||||||
|
mortgages
|
415
|
(139
|
)
|
10
|
(3
|
)
|
(129
|
)
|
92
|
246
|
||||||||||||||||||||||
|
Non-U.S.
installment
|
||||||||||||||||||||||||||||||||
|
and
revolving credit
|
1,253
|
1,669
|
92
|
(115
|
)
|
(2,324
|
)
|
796
|
1,371
|
|||||||||||||||||||||||
|
U.S.
installment and
|
||||||||||||||||||||||||||||||||
|
revolving
credit
|
876
|
1,960
|
−
|
(703
|
)
|
(1,505
|
)
|
357
|
985
|
|||||||||||||||||||||||
|
Non-U.S.
auto
|
279
|
279
|
23
|
34
|
(653
|
)
|
362
|
324
|
||||||||||||||||||||||||
|
Other
|
158
|
122
|
4
|
6
|
(198
|
)
|
70
|
162
|
||||||||||||||||||||||||
|
Real
Estate
|
155
|
24
|
3
|
3
|
(25
|
)
|
8
|
168
|
||||||||||||||||||||||||
|
Energy
Financial
|
||||||||||||||||||||||||||||||||
|
Services
|
29
|
(10
|
)
|
−
|
−
|
−
|
−
|
19
|
||||||||||||||||||||||||
|
GECAS
|
15
|
16
|
−
|
–
|
(23
|
)
|
–
|
8
|
||||||||||||||||||||||||
|
Other
|
24
|
9
|
−
|
−
|
(17
|
)
|
2
|
18
|
||||||||||||||||||||||||
|
Total
|
$
|
3,945
|
$
|
4,431
|
$
|
167
|
$
|
(607
|
)
|
$
|
(5,526
|
)
|
$
|
1,828
|
$
|
4,238
|
||||||||||||||||
|
(a)
|
Other
primarily included the effects of acquisitions and securitization
activity.
|
(105)
|
(In
millions)
|
Balance
January
1,
2006
|
Provision
charged
to
operations
|
Currency
exchange
|
Other(a)
|
Gross
write-offs
|
Recoveries
|
Balance
December
31,
2006
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
CLL
|
|||||||||||||||||||||||||||||||
|
Equipment
and
|
|||||||||||||||||||||||||||||||
|
leasing
and other
|
$
|
590
|
$
|
67
|
$
|
9
|
$
|
(8
|
)
|
$
|
(369
|
)
|
$
|
138
|
$
|
427
|
|||||||||||||||
|
Commercial
and
|
|||||||||||||||||||||||||||||||
|
industrial
|
338
|
57
|
10
|
13
|
(155
|
)
|
51
|
314
|
|||||||||||||||||||||||
|
GE
Money
|
|||||||||||||||||||||||||||||||
|
Non-U.S.
residential
|
|||||||||||||||||||||||||||||||
|
mortgages
|
397
|
69
|
34
|
(8
|
)
|
(177
|
)
|
100
|
415
|
||||||||||||||||||||||
|
Non-U.S.
installment
|
|||||||||||||||||||||||||||||||
|
and
revolving credit
|
1,060
|
1,382
|
60
|
36
|
(2,010
|
)
|
725
|
1,253
|
|||||||||||||||||||||||
|
U.S.
installment and
|
|||||||||||||||||||||||||||||||
|
revolving
credit
|
701
|
1,175
|
−
|
(217
|
)
|
(1,045
|
)
|
262
|
876
|
||||||||||||||||||||||
|
Non-U.S.
auto
|
238
|
284
|
24
|
12
|
(591
|
)
|
312
|
279
|
|||||||||||||||||||||||
|
Other
|
165
|
80
|
18
|
8
|
(184
|
)
|
71
|
158
|
|||||||||||||||||||||||
|
Real
Estate
|
189
|
(5
|
)
|
1
|
4
|
(39
|
)
|
5
|
155
|
||||||||||||||||||||||
|
Energy
Financial
|
|||||||||||||||||||||||||||||||
|
Services
|
41
|
(12
|
)
|
−
|
−
|
−
|
−
|
29
|
|||||||||||||||||||||||
|
GECAS
|
179
|
(52
|
)
|
−
|
−
|
(112
|
)
|
−
|
15
|
||||||||||||||||||||||
|
Other
|
22
|
17
|
−
|
12
|
(29
|
)
|
2
|
24
|
|||||||||||||||||||||||
|
Total
|
$
|
3,920
|
$
|
3,062
|
$
|
156
|
$
|
(148
|
)
|
$
|
(4,711
|
)
|
$
|
1,666
|
$
|
3,945
|
|||||||||||||||
|
(a)
|
Other
primarily included the effects of acquisitions and securitization
activity.
|
See Note
12 for amounts related to consolidated, liquidating securitization
entities.
(106)
NOTE
14. PROPERTY, PLANT AND EQUIPMENT
|
December
31 (Dollars in millions)
|
Depreciable
lives-new
(in
years)
|
2008
|
2007
|
||||||
|
Original
cost
|
|||||||||
|
GE
|
|||||||||
|
Land
and improvements
|
8
|
(a)
|
$
|
738
|
$
|
698
|
|||
|
Buildings,
structures and related equipment
|
8-40
|
7,354
|
7,700
|
||||||
|
Machinery
and equipment
|
4-20
|
22,114
|
20,569
|
||||||
|
Leasehold
costs and manufacturing plant
|
|||||||||
|
under
construction
|
1-10
|
2,305
|
2,121
|
||||||
|
32,511
|
31,088
|
||||||||
|
GECS(b)
|
|||||||||
|
Land
and improvements, buildings, structures
|
|||||||||
|
and
related equipment
|
2-40
|
(a)
|
7,076
|
6,051
|
|||||
|
Equipment
leased to others
|
|||||||||
|
Aircraft
|
20
|
40,478
|
37,271
|
||||||
|
Vehicles
|
1-14
|
32,098
|
32,079
|
||||||
|
Railroad
rolling stock
|
5-36
|
4,402
|
3,866
|
||||||
|
Construction
and manufacturing
|
2-25
|
3,363
|
3,031
|
||||||
|
Mobile
equipment
|
12-25
|
2,954
|
2,964
|
||||||
|
All
other
|
2-40
|
2,789
|
2,961
|
||||||
|
93,160
|
88,223
|
||||||||
|
Total
|
$
|
125,671
|
$
|
119,311
|
|||||
|
Net
carrying value
|
|||||||||
|
GE
|
|||||||||
|
Land
and improvements
|
$
|
705
|
$
|
612
|
|||||
|
Buildings,
structures and related equipment
|
3,768
|
4,101
|
|||||||
|
Machinery
and equipment
|
7,999
|
7,634
|
|||||||
|
Leasehold
costs and manufacturing plant
|
|||||||||
|
under
construction
|
1,961
|
1,795
|
|||||||
|
14,433
|
14,142
|
||||||||
|
GECS(b)
|
|||||||||
|
Land
and improvements, buildings, structures
|
|||||||||
|
and
related equipment
|
4,527
|
3,703
|
|||||||
|
Equipment
leased to others
|
|||||||||
|
Aircraft(c)
|
32,288
|
30,414
|
|||||||
|
Vehicles
|
18,149
|
20,701
|
|||||||
|
Railroad
rolling stock
|
2,915
|
2,789
|
|||||||
|
Construction
and manufacturing
|
2,333
|
2,055
|
|||||||
|
Mobile
equipment
|
2,022
|
1,976
|
|||||||
|
All
other
|
1,863
|
2,108
|
|||||||
|
64,097
|
63,746
|
||||||||
|
Total
|
$
|
78,530
|
$
|
77,888
|
|||||
|
(a)
|
Depreciable
lives exclude land.
|
|
(b)
|
Included
$1,748 million and $1,513 million of original cost of assets leased to GE
with accumulated amortization of $491 million and $315 million at December
31, 2008 and 2007, respectively.
|
|
(c)
|
The
GECAS business of Capital Finance recognized impairment losses of $72
million in 2008 and $110 million in 2007 recorded in the caption “Other
costs and expenses” in the Statement of Earnings to reflect adjustments to
fair value based on current market values from independent
appraisers.
|
(107)
Amortization
of GECS equipment leased to others was $8,173 million, $7,222 million and $5,839
million in 2008, 2007 and 2006, respectively. Noncancellable future rentals due
from customers for equipment on operating leases at December 31, 2008, are as
follows:
|
(In
millions)
|
||||||
|
Due
in
|
||||||
|
2009
|
$
|
9,103
|
||||
|
2010
|
7,396
|
|||||
|
2011
|
5,542
|
|||||
|
2012
|
4,157
|
|||||
|
2013
|
3,109
|
|||||
|
2014
and later
|
8,714
|
|||||
|
Total
|
$
|
38,021
|
NOTE
15. GOODWILL AND OTHER INTANGIBLE ASSETS
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Goodwill
|
||||||
|
GE
|
$
|
56,394
|
$
|
55,689
|
||
|
GECS
|
25,365
|
25,427
|
||||
|
Total
|
$
|
81,759
|
$
|
81,116
|
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Other
intangible assets
|
||||||
|
GE
|
||||||
|
Intangible
assets subject to amortization
|
$
|
9,010
|
$
|
9,278
|
||
|
Indefinite-lived
intangible assets(a)
|
2,354
|
2,355
|
||||
|
11,364
|
11,633
|
|||||
|
GECS
|
||||||
|
Intangible
assets subject to amortization
|
3,613
|
4,509
|
||||
|
Total
|
$
|
14,977
|
$
|
16,142
|
||
|
(a)
|
Indefinite-lived
intangible assets principally comprised trademarks, tradenames and U.S.
Federal Communications Commission
licenses.
|
Changes
in goodwill balances follow.
|
2008
|
2007
|
|||||||||||||||||||||||
|
(In
millions)
|
Balance
January
1
|
Acquisitions/
purchase
accounting
adjustments
|
Dispositions,
currency
exchange
and
other
|
Balance
December
31
|
Balance
January
1(a)
|
Acquisitions/
purchase
accounting
adjustments
|
Dispositions,
currency
exchange
and
other
|
Balance
December
31
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Energy
Infrastructure
|
$
|
9,960
|
$
|
750
|
$
|
(767
|
)
|
$
|
9,943
|
$
|
7,956
|
$
|
1,818
|
$
|
186
|
$
|
9,960
|
|||||||
|
Technology
Infrastructure
|
26,130
|
1,116
|
(562
|
)
|
26,684
|
22,043
|
4,292
|
(205
|
)
|
26,130
|
||||||||||||||
|
NBC
Universal
|
18,733
|
403
|
(163
|
)
|
18,973
|
18,000
|
733
|
–
|
18,733
|
|||||||||||||||
|
Capital
Finance
|
25,427
|
2,024
|
(2,086
|
)
|
25,365
|
22,754
|
1,938
|
735
|
25,427
|
|||||||||||||||
|
Consumer
& Industrial
|
866
|
–
|
(72
|
)
|
794
|
557
|
(22
|
)
|
331
|
866
|
||||||||||||||
|
Total
|
$
|
81,116
|
$
|
4,293
|
$
|
(3,650
|
)
|
$
|
81,759
|
$
|
71,310
|
$
|
8,759
|
$
|
1,047
|
$
|
81,116
|
|||||||
|
(a)
|
January
1, 2007, balance decreased by $89 million related to new accounting
standards. See Note 1.
|
(108)
Goodwill
balances increased $3,694 million in 2008 from new acquisitions. The most
significant increases related to acquisitions of Hydril Pressure Control ($725
million) at Energy Infrastructure, Merrill Lynch Capital ($643 million) at
Capital Finance, Vital Signs ($594 million) and Whatman plc. ($592
million) at Technology Infrastructure, Bank BPH ($470 million) at Capital
Finance, CDM Resource Management, Ltd. ($229 million) at Capital Finance and
CitiCapital ($166 million) at Capital Finance. During 2008, the goodwill balance
increased by $599 million related to purchase accounting adjustments for
prior-year acquisitions. The most significant of these adjustments were
increases of $267 million and $171 million associated with the 2007 acquisitions
of Oxygen Media Corp. by NBC Universal and Sanyo Electric Credit Co., Ltd. by
Capital Finance, respectively. In 2008, goodwill balances decreased $2,639
million as a result of the stronger U.S. dollar.
Goodwill
balances increased $9,028 million in 2007 from new acquisitions. The most
significant increases related to acquisitions of Smiths Aerospace Group Ltd.
($3,877 million) by Technology Infrastructure; Vetco Gray ($1,379 million) by
Energy Infrastructure; Diskont und Kredit AG and Disko Leasing GmbH (DISKO) and
ASL Auto Service-Leasing GmbH (ASL), the leasing businesses of KG Allgemeine
Leasing GmbH & Co. ($694 million) by Capital Finance; Oxygen Media ($604
million) by NBC Universal; and Sanyo Electric Credit Co., Ltd. ($548 million) by
Capital Finance. During 2007, the goodwill balance declined by $269 million
related to purchase accounting adjustments for prior-year
acquisitions.
Upon
closing an acquisition, we estimate the fair values of assets and liabilities
acquired and consolidate the acquisition as quickly as possible. Given the time
it takes to obtain pertinent information to finalize the acquired company’s
balance sheet, then to adjust the acquired company’s accounting policies,
procedures, and books and records to our standards, it is often several quarters
before we are able to finalize those initial fair value estimates. Accordingly,
it is not uncommon for our initial estimates to be subsequently
revised.
We test
goodwill for impairment at least annually. Given the significant changes in the
business climate for financial services and our stated strategy to reduce our
Capital Finance ending net investment, we re-tested goodwill for impairment at
the reporting units within Capital Finance during the fourth quarter of 2008. In
performing this analysis, we revised our estimated future cash flows and
discount rates, as appropriate, to reflect current market conditions in the
financial services industry. In each case, no impairment was indicated.
Reporting units within Capital Finance are CLL, GE Money, Real Estate, Energy
Financial Services and GECAS, which had goodwill balances at December 31, 2008
of $12,784 million, $9,081 million, $1,183 million, $2,162 million and $155
million, respectively.
(109)
Intangible
Assets Subject to Amortization
|
December
31 (In millions)
|
Gross
carrying
amount
|
Accumulated
amortization
|
Net
|
|||||||
|
GE
|
||||||||||
|
2008
|
||||||||||
|
Customer-related
|
$
|
4,551
|
$
|
(900
|
)
|
$
|
3,651
|
|||
|
Patents,
licenses and trademarks
|
4,751
|
(1,690
|
)
|
3,061
|
||||||
|
Capitalized
software
|
4,706
|
(2,723
|
)
|
1,983
|
||||||
|
All
other
|
470
|
(155
|
)
|
315
|
||||||
|
Total
|
$
|
14,478
|
$
|
(5,468
|
)
|
$
|
9,010
|
|||
|
2007
|
||||||||||
|
Customer-related
|
$
|
4,526
|
$
|
(698
|
)
|
$
|
3,828
|
|||
|
Patents,
licenses and trademarks
|
4,561
|
(1,369
|
)
|
3,192
|
||||||
|
Capitalized
software
|
4,573
|
(2,589
|
)
|
1,984
|
||||||
|
All
other
|
436
|
(162
|
)
|
274
|
||||||
|
Total
|
$
|
14,096
|
$
|
(4,818
|
)
|
$
|
9,278
|
|||
|
GECS
|
||||||||||
|
2008
|
||||||||||
|
Customer-related
|
$
|
1,746
|
$
|
(613
|
)
|
$
|
1,133
|
|||
|
Patents,
licenses and trademarks
|
589
|
(460
|
)
|
129
|
||||||
|
Capitalized
software
|
2,170
|
(1,476
|
)
|
694
|
||||||
|
Lease
valuations
|
1,805
|
(594
|
)
|
1,211
|
||||||
|
Present
value of future profits
|
831
|
(401
|
)
|
430
|
||||||
|
All
other
|
181
|
(165
|
)
|
16
|
||||||
|
Total
|
$
|
7,322
|
$
|
(3,709
|
)
|
$
|
3,613
|
|||
|
2007
|
||||||||||
|
Customer-related
|
$
|
2,395
|
$
|
(869
|
)
|
$
|
1,526
|
|||
|
Patents,
licenses and trademarks
|
428
|
(309
|
)
|
119
|
||||||
|
Capitalized
software
|
1,832
|
(1,095
|
)
|
737
|
||||||
|
Lease
valuations
|
1,841
|
(360
|
)
|
1,481
|
||||||
|
Present
value of future profits
|
818
|
(364
|
)
|
454
|
||||||
|
All
other
|
347
|
(155
|
)
|
192
|
||||||
|
Total
|
$
|
7,661
|
$
|
(3,152
|
)
|
$
|
4,509
|
|||
During
2008, we recorded additions to intangible assets subject to amortization of
$2,029 million. The components of finite-lived intangible assets acquired during
2008 and their respective weighted-average amortizable period are: $756 million
– Customer-related (17.1 years); $382 million – Patents, licenses and trademarks
(17.4 years); $765 million – Capitalized software (4.4 years); $38 million –
Lease valuations (8.7 years); and $88 million – All other (9.4
years).
Consolidated
amortization related to intangible assets subject to amortization was $2,091
million and $2,071 million for 2008 and 2007, respectively. We estimate that
annual pre-tax amortization for intangible assets subject to amortization over
the next five calendar years to be as follows: 2009 – $1,772 million; 2010 –
$1,541 million; 2011 – $1,326 million; 2012– $1,145 million; 2013 – $957
million.
(110)
NOTE
16. ALL OTHER ASSETS
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
GE
|
||||||
|
Investments
|
||||||
|
Associated
companies
|
$
|
2,785
|
$
|
1,871
|
||
|
Other
|
608
|
633
|
||||
|
3,393
|
2,504
|
|||||
|
Contract
costs and estimated earnings
|
5,999
|
5,983
|
||||
|
Film
and television costs
|
4,667
|
4,143
|
||||
|
Long-term
receivables, including notes(a)
|
2,613
|
2,331
|
||||
|
Derivative
instruments
|
527
|
889
|
||||
|
Pension
asset – principal plans
|
–
|
20,190
|
||||
|
Other(b)
|
5,236
|
4,568
|
||||
|
22,435
|
40,608
|
|||||
|
GECS
|
||||||
|
Investments
|
||||||
|
Real
estate(c)(d)
|
36,679
|
40,488
|
||||
|
Associated
companies
|
18,694
|
17,025
|
||||
|
Assets
held for sale(e)
|
5,038
|
10,690
|
||||
|
Cost
method(d)
|
2,482
|
2,742
|
||||
|
Other
|
1,854
|
1,018
|
||||
|
64,747
|
71,963
|
|||||
|
Derivative
instruments
|
12,115
|
3,271
|
||||
|
Advances
to suppliers
|
2,187
|
2,046
|
||||
|
Deferred
acquisition costs
|
1,230
|
1,282
|
||||
|
Other(b)
|
5,442
|
4,830
|
||||
|
85,721
|
83,392
|
|||||
|
Eliminations
|
(1,257
|
)
|
(1,152
|
)
|
||
|
Total
|
$
|
106,899
|
$
|
122,848
|
||
|
(a)
|
Included
loans to GECS of $1,038 million and $1,132 million at December 31, 2008
and 2007, respectively.
|
|
(b)
|
Included $494
million at December 31, 2008, of unamortized fees related to our
participation in the Temporary Liquidity Guarantee Program and the
Commercial Paper Funding Facility.
|
|
(c)
|
GECS
investment in real estate consisted principally of two categories: real
estate held for investment and equity method investments. Both categories
contained a wide range of properties including the following at December
31, 2008: office buildings (45%), apartment buildings (17%), industrial
properties (11%), retail facilities (9%), franchise properties (7%),
parking facilities (2%) and other (9%). At December 31, 2008, investments
were located in the Americas (47%), Europe (31%) and Asia
(22%).
|
|
(d)
|
The
fair value of and unrealized loss on cost method investments in a
continuous loss position for less than 12 months at December 31, 2008,
were $565 million and $98 million, respectively. The fair value of and
unrealized loss on cost method investments in a continuous loss position
for 12 months or more at December 31, 2008, were $64 million and $4
million, respectively. The fair value of and unrealized loss on cost
method investments in a continuous loss position for less than 12 months
at December 31, 2007, were $546 million and $93 million, respectively. The
fair value of and unrealized loss on cost method investments in a
continuous loss position for 12 months or more at December 31, 2007, were
$18 million and $8 million, respectively.
|
|
(e)
|
Assets
were classified as held for sale on the date a decision was made to
dispose of them through sale, securitization or other means. Such assets
consisted primarily of credit card receivables, loans and real estate
properties, and were accounted for at the lower of carrying amount or
estimated fair value less costs to sell. These amounts are net of
valuation allowances of $112 million and $153 million at December 31, 2008
and 2007, respectively.
|
(111)
NOTE
17. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE
On
January 7, 2009, we exchanged our GE Money 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., a leading Italian
corporate bank. Assets and liabilities of $7,887 million and $636 million,
respectively, were classified as held for sale at December 31, 2008; we
recognized a $184 million loss, net of tax, related to the classification of the
assets held for sale at the lower of carrying amount or estimated fair value
less costs to sell.
On
December 24, 2008, we committed to sell a portion of our Australian residential
mortgage business, including certain underlying mortgage receivables, and expect
to complete this sale during the first quarter of 2009. Assets of $2,669 million
were classified as held for sale at December 31, 2008 (liabilities were
insignificant); we recognized a $38 million loss, net of tax, related to the
classifications of the assets held for sale at the lower of carrying amount or
estimated fair value less costs to sell.
Summarized
financial information is shown below.
|
December
31 (In millions)
|
2008
|
|||||
|
|
||||||
|
Assets
|
|
|||||
|
Cash
and equivalents
|
|
$
|
35
|
|||
|
Financing
receivables – net
|
|
9,915
|
||||
|
Intangible
assets – net
|
|
394
|
||||
|
Other
|
|
212
|
||||
|
Assets
of businesses held for sale
|
|
$
|
10,556
|
|||
|
|
||||||
|
Liabilities
|
|
|||||
|
Liabilities
of businesses held for sale
|
|
$
|
636
|
(112)
NOTE
18. BORROWINGS
Short-term
Borrowings
|
2008
|
2007
|
|||||||||||
|
December
31 (Dollars in millions)
|
Amount
|
Average
rate(a)
|
Amount
|
Average
rate(a)
|
||||||||
|
GE
|
||||||||||||
|
Commercial
paper
|
||||||||||||
|
U.S.
|
$
|
–
|
–
|
%
|
$
|
1,798
|
4.73
|
%
|
||||
|
Non-U.S.
|
1
|
7.82
|
1
|
4.00
|
||||||||
|
Payable
to banks
|
78
|
2.91
|
189
|
5.07
|
||||||||
|
Current
portion of long-term debt
|
1,703
|
0.84
|
1,547
|
5.36
|
||||||||
|
Other
|
593
|
571
|
||||||||||
|
2,375
|
4,106
|
|||||||||||
|
GECS
|
||||||||||||
|
Commercial
paper
|
||||||||||||
|
U.S.
|
||||||||||||
|
Unsecured(b)
|
62,768
|
2.12
|
72,392
|
4.69
|
||||||||
|
Asset-backed(c)
|
3,652
|
2.57
|
4,775
|
4.94
|
||||||||
|
Non-U.S.
|
9,033
|
4.12
|
28,711
|
4.99
|
||||||||
|
Current
portion of long-term debt(d)
|
69,682
|
3.83
|
56,301
|
5.01
|
||||||||
|
Bank
deposits(e)(f)
|
29,634
|
3.47
|
11,486
|
3.04
|
||||||||
|
Bank
borrowings(g)
|
10,028
|
2.75
|
6,915
|
5.31
|
||||||||
|
GE
Interest Plus notes(h)
|
5,633
|
3.58
|
9,590
|
5.23
|
||||||||
|
Other
|
3,103
|
2,250
|
||||||||||
|
193,533
|
192,420
|
|||||||||||
|
Eliminations
|
(2,213
|
)
|
(1,426
|
)
|
||||||||
|
Total
|
$
|
193,695
|
$
|
195,100
|
||||||||
|
(a)
|
Based
on year-end balances and year-end local currency interest rates. Current
portion of long-term debt included the effects of related interest rate
and currency swaps, if any, directly associated with the original debt
issuance.
|
|
(b)
|
At
December 31, 2008, GE Capital had issued and outstanding, $21,823 million
of senior, unsecured debt that was guaranteed by the Federal Deposit
Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee
Program. GE Capital and GE entered into 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.
|
|
(c)
|
Consists
entirely of obligations of consolidated, liquidating securitization
entities. See Note 12.
|
|
(d)
|
Included
$326 million and $1,106 million related to asset-backed senior notes,
issued by consolidated, liquidating securitization entities at December
31, 2008 and 2007, respectively.
|
|
(e)
|
Included
$11,793 million and $10,789 million of deposits in non-U.S. banks at
December 31, 2008 and 2007, respectively.
|
|
(f)
|
Included
certificates of deposits distributed by brokers of $17,841 million and
$697 million at December 31, 2008 and 2007,
respectively.
|
|
(g)
|
Term
borrowings from banks with a remaining term to maturity of less than 12
months.
|
|
(h)
|
Entirely
variable denomination floating rate demand
notes.
|
(113)
Long-term
Borrowings
|
December
31 (Dollars in millions)
|
2008
Average
rate(a)
|
Maturities
|
2008
|
2007
|
|||||||
|
GE
|
|||||||||||
|
Senior
notes
|
5.11
|
%
|
2013-2017
|
$
|
8,962
|
$
|
8,957
|
||||
|
Industrial
development/pollution control bonds
|
1.10
|
2011-2027
|
264
|
266
|
|||||||
|
Payable
to banks, principally U.S.
|
6.93
|
2010-2023
|
317
|
1,988
|
|||||||
|
Other(b)
|
284
|
445
|
|||||||||
|
9,827
|
11,656
|
||||||||||
|
GECS
|
|||||||||||
|
Senior
notes
|
|||||||||||
|
Unsecured(c)
|
4.80
|
2010-2055
|
299,186
|
283,097
|
|||||||
|
Asset-backed(d)
|
5.12
|
2010-2035
|
5,002
|
5,528
|
|||||||
|
Extendible
notes
|
–
|
–
|
–
|
8,500
|
|||||||
|
Subordinated
notes(e)
|
5.70
|
2012-2037
|
2,866
|
3,313
|
|||||||
|
Subordinated
debentures(f)
|
6.00
|
2066-2067
|
7,315
|
8,064
|
|||||||
|
Bank
deposits(g)
|
4.49
|
2010-2018
|
6,699
|
–
|
|||||||
|
321,068
|
308,502
|
||||||||||
|
Eliminations
|
(828
|
)
|
(1,145
|
)
|
|||||||
|
Total
|
$
|
330,067
|
$
|
319,013
|
|||||||
|
(a)
|
Based
on year-end balances and year-end local currency interest rates, including
the effects of related interest rate and currency swaps, if any, directly
associated with the original debt issuance.
|
|
(b)
|
A
variety of obligations having various interest rates and maturities,
including certain borrowings by parent operating components and
affiliates.
|
|
(c)
|
At
December 31, 2008, GE Capital had issued and outstanding, $13,420 million
of senior, unsecured debt that was guaranteed by the FDIC under the
Temporary Liquidity Guarantee Program. GE Capital and GE entered into 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.
|
|
(d)
|
Included
$2,104 million and $3,410 million of asset-backed senior notes, issued by
consolidated, liquidating securitization entities at December 31, 2008 and
2007, respectively. See Note 12.
|
|
(e)
|
Included
$750 million of subordinated notes guaranteed by GE at December 31, 2008
and 2007.
|
|
(f)
|
Subordinated
debentures receive rating agency equity credit and were hedged at issuance
to the U.S. dollar equivalent of $7,725 million.
|
|
(g)
|
Entirely
certificates of deposits with maturities greater than one
year.
|
Our
borrowings are addressed below from the perspectives of liquidity, interest rate
and currency risk management. Additional information about borrowings and
associated swaps can be found in Note 29.
Liquidity is affected by debt
maturities and our ability to repay or refinance such debt. Long-term debt
maturities over the next five years follow.
|
(In
millions)
|
2009
|
2010
|
2011
|
2012
|
2013
|
||||||||||
|
GE
|
$
|
1,703
|
$
|
44
|
$
|
65
|
$
|
32
|
$
|
5,022
|
|||||
|
GECS
|
69,682
|
(a)
|
62,894
|
52,835
|
47,573
|
27,426
|
|||||||||
|
(a)
|
Fixed
and floating rate notes of $734 million contain put options with exercise
dates in 2009, and which have final maturity beyond
2013.
|
Committed
credit lines totaling $60.0 billion had been extended to us by 65 banks at
year-end 2008. Availability of these lines is shared between GE and GECS with
$12.6 billion and $60.0 billion available to GE and GECS, respectively. The GECS
lines include $37.4 billion of revolving credit agreements under which we can
borrow funds for periods exceeding one year. Additionally, $21.3 billion are
364-day lines that contain a term-out feature that allows GE or GECS to extend
the borrowings for one year from the date of expiration of the lending
agreement. We pay banks for credit facilities, but amounts were insignificant in
each of the past three years.
(114)
Interest rate and currency
risk is managed through the direct issuance of debt or use of
derivatives. We take positions in view of anticipated behavior of assets,
including prepayment behavior. We use a variety of instruments, including
interest rate and currency swaps and currency forwards, to achieve our interest
rate objectives.
The
following table provides additional information about derivatives designated as
hedges of borrowings in accordance with SFAS133, Accounting for Derivative
Instruments and Hedging Activities, as amended.
Derivative
Fair Values by Activity/Instrument
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Cash
flow hedges
|
$
|
(4,529
|
)
|
$
|
497
|
|
|
Fair
value hedges
|
8,304
|
(75
|
)
|
|||
|
Total
|
$
|
3,775
|
$
|
422
|
||
|
Interest
rate swaps
|
$
|
3,425
|
$
|
(1,559
|
)
|
|
|
Currency
swaps
|
350
|
1,981
|
||||
|
Total
|
$
|
3,775
|
$
|
422
|
We
regularly assess the effectiveness of all hedge positions where required using a
variety of techniques, including cumulative dollar offset and regression
analysis, depending on which method was selected at inception of the respective
hedge. Adjustments related to fair value hedges increased the carrying amount of
debt outstanding at December 31, 2008, by $9,127 million. At December 31, 2008,
the maximum term of derivative instruments that hedge forecasted transactions
was 27 years. See Note 29.
NOTE
19. GECS INVESTMENT CONTRACTS, INSURANCE LIABILITIES AND INSURANCE ANNUITY
BENEFITS
GECS
investment contracts, insurance liabilities and insurance annuity benefits
comprise mainly obligations to annuitants and policyholders in our run-off
insurance operations and holders of guaranteed investment
contracts.
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Investment
contracts
|
$
|
4,212
|
$
|
4,536
|
||
|
Guaranteed
investment contracts
|
10,828
|
11,705
|
||||
|
Total
investment contracts
|
15,040
|
16,241
|
||||
|
Life
insurance benefits(a)
|
16,259
|
15,416
|
||||
|
Unpaid
claims and claims adjustment expenses
|
2,145
|
1,726
|
||||
|
Unearned
premiums
|
623
|
656
|
||||
|
Universal
life benefits
|
302
|
320
|
||||
|
Total
|
$
|
34,369
|
$
|
34,359
|
||
|
(a)
|
Life
insurance benefits are accounted for mainly by a net-level-premium method
using estimated yields generally ranging from 3.0% to 8.50% in both 2008
and 2007.
|
When
insurance affiliates cede insurance to third parties, such as reinsurers, they
are not relieved of their primary obligation to policyholders. Losses on ceded
risks give rise to claims for recovery; we establish allowances for probable
losses on such receivables from reinsurers as required. Reinsurance recoverables
are included in the caption “Other GECS receivables" on our Statement of
Financial Position, and amounted to $1,062 million and $381 million at December
31, 2008 and 2007, respectively.
We
recognize reinsurance recoveries as a reduction of the Statement of Earnings
caption “Investment contracts, insurance losses and insurance annuity benefits.”
Reinsurance recoveries were $221 million, $104 million and $162 million for the
years ended December 31, 2008, 2007 and 2006, respectively.
(115)
NOTE
20. ALL OTHER LIABILITIES
This
caption includes liabilities for various items including non-current
compensation and benefits, deferred income, interest on tax liabilities,
unrecognized tax benefits, accrued participation and residuals, environmental
remediation, asset retirement obligations, derivative instruments, product
warranties and a variety of sundry items.
Accruals
for non-current compensation and benefits amounted to $22,543 million and
$22,322 million for year-end 2008 and 2007, respectively. These amounts include
postretirement benefits, pension accruals, and other compensation and benefit
accruals such as deferred incentive compensation. The increase in 2008 was
primarily the result of an increase in pension accruals, partially offset by a
decrease in accrued deferred incentive compensation and benefits from new
healthcare supplier contracts.
We are
involved in numerous remediation actions to clean up hazardous wastes as
required by federal and state laws. Liabilities for remediation costs exclude
possible insurance recoveries and, when dates and amounts of such costs are not
known, are not discounted. When there appears to be a range of possible costs
with equal likelihood, liabilities are based on the low end of such range.
Uncertainties about the status of laws, regulations, technology and information
related to individual sites make it difficult to develop a meaningful estimate
of the reasonably possible aggregate environmental remediation
exposure.
NOTE
21. DEFERRED INCOME TAXES
Aggregate
deferred income tax amounts are summarized below.
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Assets
|
||||||
|
GE
|
$
|
(13,493
|
)
|
$
|
(13,122
|
)
|
|
GECS
|
(11,180
|
)
|
(6,293
|
)
|
||
|
(24,673
|
)
|
(19,415
|
)
|
|||
|
Liabilities
|
||||||
|
GE
|
9,544
|
16,513
|
||||
|
GECS
|
19,713
|
15,392
|
||||
|
29,257
|
31,905
|
|||||
|
Net
deferred income tax liability
|
$
|
4,584
|
$
|
12,490
|
(116)
Principal
components of our net liability (asset) representing deferred income tax
balances are as follows:
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
GE
|
||||||
|
Intangible
assets
|
$
|
2,664
|
$
|
2,609
|
||
|
Contract
costs and estimated earnings
|
2,319
|
2,215
|
||||
|
Depreciation
|
1,205
|
1,360
|
||||
|
Investment
in global subsidiaries
|
444
|
318
|
||||
|
Pension
asset – principal plans
|
–
|
7,067
|
||||
|
Provision
for expenses(a)
|
(6,578
|
)
|
(6,426
|
)
|
||
|
Retiree
insurance plans
|
(4,355
|
)
|
(4,616
|
)
|
||
|
Non-U.S.
loss carryforwards(b)
|
(800
|
)
|
(925
|
)
|
||
|
Other
– net
|
1,152
|
1,789
|
||||
|
(3,949
|
)
|
3,391
|
||||
|
GECS
|
||||||
|
Financing
leases
|
7,317
|
7,089
|
||||
|
Operating
leases
|
4,882
|
4,478
|
||||
|
Investment
in global subsidiaries
|
2,127
|
(1,203
|
)
|
|||
|
Intangible
assets
|
1,360
|
1,427
|
||||
|
Allowance
for losses
|
(2,459
|
)
|
(1,478
|
)
|
||
|
Cash
flow hedges
|
(2,260
|
)
|
(496
|
)
|
||
|
Net
unrealized losses on securities
|
(1,634
|
)
|
(14
|
)
|
||
|
Non-U.S.
loss carryforwards(b)
|
(979
|
)
|
(805
|
)
|
||
|
Other
– net
|
179
|
101
|
||||
|
8,533
|
9,099
|
|||||
|
Net
deferred income tax liability
|
$
|
4,584
|
$
|
12,490
|
||
|
(a)
|
Represented
the tax effects of temporary differences related to expense accruals for a
wide variety of items, such as employee compensation and benefits, pension
plan liabilities, interest on tax liabilities, product warranties and
other sundry items that are not currently deductible.
|
|
(b)
|
Net
of valuation allowances of $635 million and $557 million for GE and $260
million and $196 million for GECS, for 2008 and 2007, respectively. Of the
net deferred tax asset as of December 31, 2008, of $1,779 million, $33
million relates to net operating loss carryforwards that expire in various
years ending from December 31, 2009, through December 31, 2011; $160
million relates to net operating losses that expire in various years
ending from December 31, 2012, through December 31, 2023; and $1,586 million relates to
net operating loss carryforwards that may be carried forward
indefinitely.
|
NOTE
22. MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES
Minority
interest in equity of consolidated affiliates includes common shares in
consolidated affiliates and preferred stock issued by affiliates of GE Capital.
Preferred shares that we are required to redeem at a specified or determinable
date are classified as liabilities. The balance is summarized as
follows:
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Minority
interest in consolidated affiliates
|
||||||
|
NBC
Universal
|
$
|
5,091
|
$
|
5,025
|
||
|
Others(a)
|
3,579
|
2,698
|
||||
|
Minority
interest in preferred stock(b)
|
||||||
|
GE
Capital affiliates
|
277
|
281
|
||||
|
Total
|
$
|
8,947
|
$
|
8,004
|
||
|
(a)
|
Included
minority interest in partnerships and common shares of consolidated
affiliates.
|
|
(b)
|
The
preferred stock pays cumulative dividends at an average rate of
6.81%.
|
(117)
NOTE
23. SHAREOWNERS’ EQUITY
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Preferred
stock issued(a)(b)
|
$
|
–
|
$
|
–
|
$
|
–
|
|||
|
Common
stock issued(a)(b)
|
$
|
702
|
$
|
669
|
$
|
669
|
|||
|
Accumulated
other comprehensive income
|
|||||||||
|
Balance
at January 1
|
$
|
8,324
|
$
|
3,254
|
$
|
3,137
|
|||
|
Investment
securities – net of deferred taxes of $(2,528),
|
|||||||||
|
$(510)
and $111
|
(3,813
|
)
|
(972
|
)
|
297
|
||||
|
Currency
translation adjustments – net of deferred taxes
|
|||||||||
|
of
$4,082, $(1,319) and $(1,417)
|
(10,890
|
)
|
4,662
|
3,776
|
|||||
|
Cash
flow hedges – net of deferred taxes of $(1,982), $(213)
|
|||||||||
|
and
$75
|
(2,781
|
)
|
23
|
599
|
|||||
|
Benefit
plans – net of deferred taxes of $(7,379), $860 and $182(c)
|
(13,288
|
)
|
2,566
|
287
|
|||||
|
Reclassification
adjustments
|
|||||||||
|
Investment
securities – net of deferred taxes of $734,
|
|||||||||
|
$(375)
and $(279)
|
595
|
(512
|
)
|
(520
|
)
|
||||
|
Currency
translation adjustments
|
(117
|
)
|
(135
|
)
|
(127
|
)
|
|||
|
Cash
flow hedges – net of deferred taxes of $295, $(119)
|
|||||||||
|
and
$(60)
|
117
|
(562
|
)
|
(376
|
)
|
||||
|
Cumulative
effect of change in accounting principle –
|
|||||||||
|
net
of deferred taxes of $(2,715)
|
–
|
–
|
(3,819
|
)
|
|||||
|
Balance
at December 31(d)
|
$
|
(21,853
|
)
|
$
|
8,324
|
$
|
3,254
|
||
|
Other
capital
|
|||||||||
|
Balance
at January 1
|
$
|
26,100
|
$
|
25,486
|
$
|
25,227
|
|||
|
Common
stock issuance(b)
|
11,972
|
–
|
–
|
||||||
|
Preferred
stock and warrant issuance(b)
|
2,965
|
–
|
–
|
||||||
|
Gains
(losses) on treasury stock dispositions and other(b)
|
(647
|
)
|
614
|
259
|
|||||
|
Balance
at December 31
|
$
|
40,390
|
$
|
26,100
|
$
|
25,486
|
|||
|
Retained
earnings
|
|||||||||
|
Balance
at January 1(e)
|
$
|
117,362
|
$
|
106,867
|
$
|
96,926
|
|||
|
Net
earnings
|
17,410
|
22,208
|
20,742
|
||||||
|
Dividends(b)(f)
|
(12,649
|
)
|
(11,713
|
)
|
(10,675
|
)
|
|||
|
Balance
at December 31
|
$
|
122,123
|
$
|
117,362
|
$
|
106,993
|
|||
|
Common
stock held in treasury
|
|||||||||
|
Balance
at January 1
|
$
|
(36,896
|
)
|
$
|
(24,893
|
)
|
$
|
(17,326
|
)
|
|
Purchases(b)
|
(3,508
|
)
|
(14,913
|
)
|
(10,512
|
)
|
|||
|
Dispositions(b)
|
3,707
|
2,910
|
2,945
|
||||||
|
Balance
at December 31
|
$
|
(36,697
|
)
|
$
|
(36,896
|
)
|
$
|
(24,893
|
)
|
|
Total
equity
|
|||||||||
|
Balance
at December 31
|
$
|
104,665
|
$
|
115,559
|
$
|
111,509
|
|||
|
(a)
|
Additions
resulting from issuances in 2008 were inconsequential for preferred stock
and $33 million for common stock.
|
|
(b)
|
Total
dividends and other transactions with shareowners, inclusive of additions
to par value discussed in note (a), increased equity by $1,873 million in
2008, and reduced equity by $23,102 million in 2007 and $17,983 million in
2006.
|
|
(c)
|
For
2008, included $(43) million of prior service costs for plan amendments,
$534 million of amortization of prior service costs, $(13,980) million of
gains (losses) arising during the year and $201 million of amortization of
gains (losses) – net of deferred taxes of $(24) million, $441 million,
$(7,893) million and $97 million, respectively. For 2007, included
$(3,122) million of prior service costs for plan amendments, $494 million
of amortization of prior service costs, $4,666 million of gains (losses)
arising during the year and $528 million of amortization of gains (losses)
– net of deferred taxes of $(2,482) million, $339 million, $2,639 million
and $364 million, respectively.
|
|
(d)
|
At
December 31, 2008, included additions to equity of $2,865 million related
to hedges of our investments in financial services subsidiaries that have
functional currencies other than the U.S. dollar and reductions of $3,332
million related to cash flow hedges of forecasted transactions, of which
we expect to transfer $1,892 million to earnings as an expense in 2009
along with the earnings effects of the related forecasted
transaction.
|
|
(e)
|
2007
opening balance change reflects cumulative effect of changes in accounting
principles of $(49) million related to adopting FIN 48 and $(77) million
related to adoption of FSP FAS 13-2. The cumulative effect of adopting
SFAS 159 at January 1, 2008, was insignificant. See Note
1.
|
|
(f)
|
For
2008, included $75 million of dividends on preferred
stock.
|
(118)
Shares
of GE Preferred Stock
On
October 16, 2008, GE issued 30,000 shares of GE’s 10% cumulative perpetual
preferred stock, par value $1.00 per share, having an aggregate liquidation
value of $3.0 billion, and warrants to purchase 134,831,460 shares of GE’s
common stock, par value $0.06 per share, for an aggregate purchase price of $3.0
billion in cash. The preferred stock is redeemable at GE’s option after three
years, in whole or in part, at a price of 110% of liquidation value plus accrued
and unpaid dividends. The warrants are exercisable at the holder’s option at any
time and from time to time, in whole or in part, for five years at an exercise
price of $22.25 per share of common stock and are settled through physical share
issuance. GE has 50 million authorized shares of preferred stock ($1.00 par
value), and has issued 30 thousand shares as of December 31, 2008.
Shares
of GE Common Stock
On
September 25, 2008, we suspended our three-year, $15 billion share repurchase
program, which was initiated in December 2007. Under this program, on a book
basis, we repurchased 99.1 million shares for a total of $3.1 billion during
2008.
On
October 7, 2008, GE completed an offering of 547.8 million shares of common
stock at a price of $22.25 per share.
Common
shares issued and outstanding are summarized in the following
table.
|
December
31 (In thousands)
|
2008
|
2007
|
2006
|
|||
|
Issued
|
11,693,829
|
11,145,252
|
11,145,212
|
|||
|
In
treasury
|
(1,156,932
|
)
|
(1,157,653
|
)
|
(867,839
|
)
|
|
Outstanding
|
10,536,897
|
9,987,599
|
10,277,373
|
We grant
stock options, restricted stock units (RSUs) and performance share units (PSUs)
to employees under the 2007 Long-Term Incentive Plan. This plan replaced the
1990 Long-Term Incentive Plan. In addition, we grant options and RSUs in limited
circumstances to consultants, advisors and independent contractors (primarily
non-employee talent at NBC Universal) under a plan approved by our Board of
Directors in 1997 (the consultants’ plan). There are outstanding grants under
one shareowner-approved option plan for non-employee directors. Share
requirements for all plans may be met from either unissued or treasury shares.
Stock options expire 10 years from the date they are granted and vest over
service periods that range from one to five years. RSUs give the recipients the
right to receive shares of our stock upon the vesting of their related
restrictions. Restrictions on RSUs vest in various increments and at various
dates, beginning after one year from date of grant through grantee retirement.
Although the plan permits us to issue RSUs settleable in cash, we have only
issued RSUs settleable in shares of our stock. PSUs give recipients the right to
receive shares of our stock upon the achievement of certain performance
targets.
All
grants of GE options under all plans must be approved by the Management
Development and Compensation Committee, which consists entirely of independent
directors.
(119)
Stock
Compensation Plans
|
December
31, 2008 (Shares in thousands)
|
Securities
to
be
issued
upon
exercise
|
Weighted
average
exercise
price
|
Securities
available
for
future
issuance
|
||||||
|
Approved
by shareowners
|
|||||||||
|
Options
|
214,824
|
$
|
36.30
|
(a)
|
|||||
|
RSUs
|
36,392
|
(b)
|
(a)
|
||||||
|
PSUs
|
1,050
|
(b)
|
(a)
|
||||||
|
Not
approved by shareowners (Consultants’ Plan)
|
|||||||||
|
Options
|
683
|
35.85
|
(c)
|
||||||
|
RSUs
|
91
|
(b)
|
(c)
|
||||||
|
Total
|
253,040
|
$
|
36.30
|
462,787
|
|||||
|
(a)
|
In
2007, the Board of Directors approved the 2007 Long-Term Incentive Plan
(the Plan). The Plan replaced the 1990 Long-Term Incentive Plan. The
maximum number of shares that may be granted under the Plan is 500 million
shares, of which no more than 250 million may be available for awards
granted in any form provided under the Plan other than options or stock
appreciation rights. The approximate 105.9 million shares available for
grant under the 1990 Plan were retired upon approval of the 2007 Plan.
Total shares available for future issuance under the 2007 Plan amounted to
439.0 million shares at December 31, 2008.
|
|
(b)
|
Not
applicable.
|
|
(c)
|
Total
shares available for future issuance under the consultants’ plan amount to
23.8 million shares.
|
Outstanding
options expire on various dates through December 11, 2018.
The
following table summarizes information about stock options outstanding at
December 31, 2008.
Stock
Options Outstanding
|
(Shares
in thousands)
|
Outstanding
|
Exercisable
|
|||||||||||||
|
Exercise
price range
|
Shares
|
Average
life(a)
|
Average
exercise
price
|
Shares
|
Average
exercise
price
|
||||||||||
|
Under
$27.00
|
784
|
4.6
|
$
|
22.50
|
568
|
$
|
23.94
|
||||||||
|
27.01–
32.00
|
66,510
|
6.1
|
28.36
|
40,767
|
28.39
|
||||||||||
|
32.01–
37.00
|
61,593
|
4.6
|
34.73
|
47,045
|
34.91
|
||||||||||
|
37.01–
42.00
|
32,555
|
4.7
|
39.19
|
19,843
|
39.47
|
||||||||||
|
42.01–
47.00
|
42,045
|
2.0
|
43.29
|
42,045
|
43.29
|
||||||||||
|
Over
$47.00
|
12,020
|
1.7
|
56.86
|
12,020
|
56.86
|
||||||||||
|
Total
|
215,507
|
4.4
|
$
|
36.30
|
162,288
|
$
|
37.59
|
||||||||
|
At
year-end 2007, options with an average exercise price of $36.98 were
exercisable on 168 million shares.
|
|
|
(a)
|
Average
contractual life remaining in
years.
|
(120)
Stock
Option Activity
|
Shares
(in
thousands)
|
Weighted
average
exercise
price
|
Weighted
average
remaining
contractual
term
(in
years)
|
Aggregate
intrinsic
value
(in
millions)
|
||||||||||||
|
Outstanding
at January 1, 2008
|
213,382
|
$
|
36.68
|
||||||||||||
|
Granted
|
25,317
|
28.21
|
|||||||||||||
|
Exercised
|
(13,271
|
)
|
26.62
|
||||||||||||
|
Forfeited
|
(2,831
|
)
|
35.18
|
||||||||||||
|
Expired
|
(7,090
|
)
|
37.40
|
||||||||||||
|
Outstanding
at December 31, 2008
|
215,507
|
$
|
36.30
|
4.4
|
$
|
–
|
|||||||||
|
Exercisable
at December 31, 2008
|
162,288
|
$
|
37.59
|
3.0
|
$
|
–
|
|||||||||
|
Options
expected to vest
|
47,092
|
$
|
32.45
|
8.5
|
$
|
–
|
|||||||||
We
measure the fair value of each stock option grant at the date of grant using a
Black-Scholes option pricing model. The weighted average grant-date fair value
of options granted during 2008, 2007 and 2006 was $5.26, $9.28 and $7.99,
respectively. The following assumptions were used in arriving at the fair value
of options granted during 2008, 2007 and 2006, respectively: risk-free interest
rates of 3.4%, 4.2% and 4.8%; dividend yields of 4.4%, 2.9% and 2.9%; expected
volatility of 27%, 25% and 24%; and expected lives of six years and nine months,
six years and ten months, and six years and two months. Risk-free interest rates
reflect the yield on zero-coupon U.S. Treasury securities. Expected dividend
yields presume a set dividend rate. For stock options granted in the fourth
quarter of 2008, we used a historical five-year average for the dividend yield.
Expected volatilities are based on implied volatilities from traded options and
historical volatility of our stock. The expected option lives are based on our
historical experience of employee exercise behavior.
The
total intrinsic value of options exercised during 2008, 2007 and 2006 amounted
to $45 million, $375 million and $587 million, respectively. As of December 31,
2008, there was $251 million of total unrecognized compensation cost related to
nonvested options. That cost is expected to be recognized over a weighted
average period of two years, of which approximately $84 million is expected to
be recognized in 2009.
Stock
option expense recognized in net earnings amounted to $69 million in both 2008
and 2007, and $96 million in 2006. Cash received from option exercises during
2008, 2007 and 2006 was $353 million, $747 million and $622 million,
respectively. The tax benefit realized from stock options exercised during 2008,
2007 and 2006 was $15 million, $131 million and $203 million,
respectively.
Other
Stock-based Compensation
|
Shares
(in
thousands)
|
Weighted
average
grant
date
fair
value
|
Weighted
average
remaining
contractual
term
(in
years)
|
Aggregate
intrinsic
value
(in
millions)
|
||||||||||||
|
RSUs
outstanding at January 1, 2008
|
37,129
|
$
|
33.48
|
||||||||||||
|
Granted
|
10,794
|
28.74
|
|||||||||||||
|
Vested
|
(9,445
|
)
|
31.34
|
||||||||||||
|
Forfeited
|
(1,995
|
)
|
34.61
|
||||||||||||
|
RSUs
outstanding at December 31, 2008
|
36,483
|
$
|
32.57
|
2.9
|
$
|
591
|
|||||||||
|
RSUs
expected to vest
|
33,239
|
$
|
32.61
|
2.8
|
$
|
538
|
|||||||||
(121)
The fair
value of each restricted stock unit is the market price of our stock on the date
of grant. The weighted average grant date fair value of RSUs granted during
2008, 2007 and 2006 was $28.74, $38.84 and $33.95, respectively. The total
intrinsic value of RSUs vested during 2008, 2007 and 2006 amounted to $274
million, $181 million and $132 million, respectively. As of December 31, 2008,
there was $687 million of total unrecognized compensation cost related to
nonvested RSUs. That cost is expected to be recognized over a weighted average
period of two years, of which approximately $205 million is expected to be
recognized in 2009. As of December 31, 2008, 1.1 million PSUs with a weighted
average remaining contractual term of two years, an aggregate intrinsic value of
$17 million and $10 million of unrecognized compensation cost were
outstanding.
Other
share-based compensation expense recognized in net earnings amounted to $155
million, $173 million and $130 million in 2008, 2007 and 2006, respectively. The
total income tax benefit recognized in earnings for all share-based compensation
arrangements amounted to $106 million, $118 million and $117 million in 2008,
2007 and 2006, respectively.
When
stock options are exercised and restricted stock vests, the difference between
the assumed tax benefit and the actual tax benefit must be recognized in our
financial statements. In circumstances in which the actual tax benefit is lower
than the estimated tax benefit, SFAS 123(R) requires that difference to be
recorded in equity, to the extent there are sufficient accumulated excess tax
benefits, as defined by the standard. At December 31, 2008, our accumulated
excess tax benefits are sufficient to absorb any future differences between
actual and estimated tax benefits for all of our outstanding option and
restricted stock grants.
NOTE
25. SUPPLEMENTAL CASH FLOWS INFORMATION
Changes
in operating assets and liabilities are net of acquisitions and dispositions of
principal businesses.
Amounts
reported in the “Payments for principal businesses purchased” line in the
Statement of Cash Flows is net of cash acquired and included debt assumed and
immediately repaid in acquisitions.
Amounts
reported in the “All other operating activities” line in the Statement of Cash
Flows consists primarily of adjustments to current and noncurrent accruals and
deferrals of costs and expenses, adjustments for gains and losses on assets,
increases and decreases in assets held for sale and adjustments to assets. In
2008, GE received $300 million (12.7 million shares) worth of its shares in
connection with the disposition of NBC Universal’s 57% interest in the Sundance
Channel. There were no significant non-cash transactions in 2007. In 2006, we
had a significant non-cash transaction in connection with our sale of GE
Insurance Solutions: Swiss Re assumed $1,700 million of debt, and GE received
$2,238 million of newly issued Swiss Re common stock. See Note 2.
(122)
Certain
supplemental information related to GE and GECS cash flows is shown
below.
|
December
31 (In millions)
|
2008
|
2007
|
2006
|
||||||
|
GE
|
|||||||||
|
Net
dispositions (purchases) of GE shares
|
|||||||||
|
for
treasury
|
|||||||||
|
Open
market purchases under share repurchase program
|
$
|
(3,222
|
)
|
$
|
(13,896
|
)
|
$
|
(8,054
|
)
|
|
Other
purchases
|
(286
|
)
|
(1,017
|
)
|
(2,458
|
)
|
|||
|
Dispositions
|
2,259
|
2,594
|
1,958
|
||||||
|
$
|
(1,249
|
)
|
$
|
(12,319
|
)
|
$
|
(8,554
|
)
|
|
|
GECS
|
|||||||||
|
All
other operating activities
|
|||||||||
|
Net
change in other assets
|
$
|
(1,461
|
)
|
$
|
(1,507
|
)
|
$
|
(1,709
|
)
|
|
Amortization
of intangible assets
|
994
|
879
|
599
|
||||||
|
Realized
losses (gains) on investment securities
|
1,260
|
(885
|
)
|
(132
|
)
|
||||
|
Change
in other liabilities
|
4,514
|
3,378
|
3,345
|
||||||
|
Other
|
3,201
|
(2,404
|
)
|
(1,068
|
)
|
||||
|
$
|
8,508
|
$
|
(539
|
)
|
$
|
1,035
|
|||
|
Net
increase in GECS financing receivables
|
|||||||||
|
Increase
in loans to customers
|
$
|
(411,913
|
)
|
$
|
(408,611
|
)
|
$
|
(371,835
|
)
|
|
Principal
collections from customers – loans
|
363,455
|
322,074
|
296,708
|
||||||
|
Investment
in equipment for financing leases
|
(21,671
|
)
|
(26,489
|
)
|
(25,618
|
)
|
|||
|
Principal
collections from customers – financing leases
|
20,159
|
20,868
|
18,791
|
||||||
|
Net
change in credit card receivables
|
(34,498
|
)
|
(38,405
|
)
|
(25,787
|
)
|
|||
|
Sales
of financing receivables
|
67,093
|
86,399
|
67,471
|
||||||
|
$
|
(17,375
|
)
|
$
|
(44,164
|
)
|
$
|
(40,270
|
)
|
|
|
All
other investing activities
|
|||||||||
|
Purchases
of securities by insurance activities
|
$
|
(4,190
|
)
|
$
|
(13,279
|
)
|
$
|
(11,891
|
)
|
|
Dispositions
and maturities of securities by insurance activities
|
4,690
|
15,602
|
11,635
|
||||||
|
Other
assets – investments
|
(205
|
)
|
(10,218
|
)
|
(6,242
|
)
|
|||
|
Change
in other receivables
|
3,331
|
(2,456
|
)
|
(55
|
)
|
||||
|
Other
|
2,353
|
1,621
|
558
|
||||||
|
$
|
5,979
|
$
|
(8,730
|
)
|
$
|
(5,995
|
)
|
||
|
Newly
issued debt having maturities
|
|||||||||
|
longer
than 90 days
|
|||||||||
|
Short-term
(91 to 365 days)
|
$
|
34,445
|
$
|
1,226
|
$
|
1,237
|
|||
|
Long-term
(longer than one year)
|
87,949
|
90,769
|
86,028
|
||||||
|
Proceeds
– nonrecourse, leveraged lease
|
113
|
24
|
1,015
|
||||||
|
$
|
122,507
|
$
|
92,019
|
$
|
88,280
|
||||
|
Repayments
and other reductions of debt
|
|||||||||
|
having
maturities longer than 90 days
|
|||||||||
|
Short-term
(91 to 365 days)
|
$
|
(66,015
|
)
|
$
|
(43,937
|
)
|
$
|
(42,273
|
)
|
|
Long-term
(longer than one year)
|
(462
|
)
|
(4,482
|
)
|
(5,576
|
)
|
|||
|
Principal
payments – nonrecourse, leveraged lease
|
(637
|
)
|
(1,109
|
)
|
(1,404
|
)
|
|||
|
$
|
(67,114
|
)
|
$
|
(49,528
|
)
|
$
|
(49,253
|
)
|
|
|
All
other financing activities
|
|||||||||
|
Proceeds
from sales of investment contracts
|
$
|
11,433
|
$
|
12,641
|
$
|
16,418
|
|||
|
Redemption
of investment contracts
|
(13,304
|
)
|
(13,862
|
)
|
(17,603
|
)
|
|||
|
Capital
contribution
|
5,500
|
–
|
–
|
||||||
|
Other
|
9
|
17
|
11
|
||||||
|
$
|
3,638
|
$
|
(1,204
|
)
|
$
|
(1,174
|
)
|
(123)
NOTE
26. INTERCOMPANY TRANSACTIONS
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividend to GE; 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.
|
December
31 (In millions)
|
2008
|
2007
|
2006
|
||||||
|
Operating
|
|||||||||
|
Sum
of GE and GECS cash from operating
|
|||||||||
|
activities
– continuing operations
|
$
|
50,290
|
$
|
48,316
|
$
|
45,351
|
|||
|
Elimination
of GECS dividend to GE
|
(2,351
|
)
|
(7,291
|
)
|
(9,847
|
)
|
|||
|
Net
decrease (increase) in GE customer receivables
|
|||||||||
|
sold
to GECS
|
90
|
(255
|
)
|
(2,036
|
)
|
||||
|
Other
reclassifications and eliminations
|
(188
|
)
|
(828
|
)
|
(956
|
)
|
|||
|
Consolidated
cash from operating activities –
|
|||||||||
|
continuing
operations
|
$
|
47,841
|
$
|
39,942
|
$
|
32,512
|
|||
|
Investing
|
|||||||||
|
Sum
of GE and GECS cash used for investing
|
|||||||||
|
activities
– continuing operations
|
$
|
(39,615
|
)
|
$
|
(67,845
|
)
|
$
|
(54,132
|
)
|
|
Net
increase (decrease) in GE customer receivables
|
|||||||||
|
sold
to GECS
|
(90
|
)
|
255
|
2,036
|
|||||
|
Other
reclassifications and eliminations
|
(320
|
)
|
1,202
|
1,223
|
|||||
|
Consolidated
cash used for investing activities –
|
|||||||||
|
continuing
operations
|
$
|
(40,025
|
)
|
$
|
(66,388
|
)
|
$
|
(50,873
|
)
|
|
Financing
|
|||||||||
|
Sum
of GE and GECS cash from financing
|
|||||||||
|
activities
– continuing operations
|
$
|
22,760
|
$
|
18,751
|
$
|
16,772
|
|||
|
Elimination
of short-term intercompany borrowings(a)
|
(787
|
)
|
1,950
|
(2,732
|
)
|
||||
|
Elimination
of GECS dividend to GE
|
2,351
|
7,291
|
9,847
|
||||||
|
Other
reclassifications and eliminations
|
316
|
99
|
(48
|
)
|
|||||
|
Consolidated
cash from financing activities –
|
|||||||||
|
continuing
operations
|
$
|
24,640
|
$
|
28,091
|
$
|
23,839
|
|||
|
(a)
|
Represents
GE investment in GECS short-term borrowings, such as commercial
paper.
|
Basis
for presentation
Our
operating businesses are organized based on the nature of markets and customers.
Segment accounting policies are the same as described in Note 1. Segment results
for our financial services businesses reflect the discrete tax effect of
transactions, but the intraperiod tax allocation is reflected outside of the
segment unless otherwise noted in segment results.
Effects
of transactions between related companies are eliminated and consist primarily
of GECS dividend to GE; 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; 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.
(124)
A
description of our operating segments as of December 31, 2008, can be found
below, and details of segment profit by operating segment can be found in the
Summary of Operating Segments table in Part II, Item 7. “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of this Form 10-K
Report.
Energy
Infrastructure
Power
plant products and services, including design, installation, operation and
maintenance services are sold into global markets. Gas, steam and aeroderivative
turbines, generators, combined cycle systems, controls and related services,
including total asset optimization solutions, equipment upgrades and long-term
maintenance service agreements are sold to power generation and other
industrial customers. Renewable energy solutions include wind turbines and solar
technology. Water treatment services and equipment include specialty chemical
treatment programs, water purification equipment, mobile treatment systems and
desalination processes.
The Oil
& Gas business sells surface and subsea drilling and production systems,
equipment for floating production platforms, compressors, turbines,
turboexpanders and high pressure reactors to national, international and
independent oil and gas companies. Services include equipment overhauls and
upgrades, pipeline inspection and integrity services, remote diagnostic and
monitoring and contractual service agreements. The acquisition of Hydril
Pressure Controls in April 2008 strengthened the drilling solutions portfolio
through the addition of blow out preventers, control technology and associated
services.
Technology
Infrastructure
Aviation
products and services include jet engines, aerospace systems and equipment,
replacement parts and repair and maintenance services for all categories of
commercial aircraft; for a wide variety of military aircraft, including
fighters, bombers, tankers and helicopters; for marine applications; and
for executive and regional aircraft. Products and services are sold worldwide to
airframe manufacturers, airlines and government agencies.
Healthcare
products include diagnostic imaging systems such as magnetic resonance (MR),
computed tomography (CT) and positron emission tomography (PET) scanners, X-ray,
nuclear imaging and ultrasound. Healthcare manufactured technologies include
patient monitoring, diagnostic cardiology, bone densitometry, anesthesiology,
and oxygen therapy, and neonatal and critical care devices. Related services,
including equipment monitoring and repair, information technologies and customer
productivity services. Products also include diagnostic imaging agents used in
medical scanning procedures, products used in the purification of
biopharmaceuticals, and tools for protein and cellular analysis for
pharmaceutical and academic research. Products and services are sold worldwide
to hospitals, medical facilities, pharmaceutical and biotechnology companies,
and to the life science research market.
Transportation
products and maintenance services include diesel electric locomotives, transit
propulsion equipment, motorized wheels for off-highway vehicles, gearing
technology for wind turbines, drill motors, marine and stationary power
generation, and railway signaling and office systems.
Enterprise
Solutions offers integrated solutions using sensors for temperature, pressure,
moisture, gas and flow rate as well as non-destructive testing inspection
equipment, including radiographic, ultrasonic, remote visual and eddy current.
Enterprise Solutions also offers security and life safety technologies,
including explosives and narcotics detection, intrusion and access control,
video surveillance and sensor monitoring equipment, and fire detection and
provides protection and control, communications, power sensing and power quality
products and services that increase the reliability of electrical power networks
and critical equipment and offering wireless data transmission. Plant
automation, hardware, software and embedded computing systems including
controllers, embedded systems, advanced software, motion control, computer
numerical controls, operator interfaces, industrial computers, and lasers are
also provided by Enterprise Solutions. Markets are extremely diverse. Products
and services are sold to residential, commercial and industrial end-users,
including utilities, original equipment manufacturers, electrical distributors,
retail outlets, airports, railways, and transit authorities. Increasingly,
products and services are developed for and sold in global markets.
NBC
Universal
Principal
businesses are the broadcast of U.S. network television, production and
distribution of films and television programs, operation of television stations,
operation of cable/satellite television networks around the world, operation of
theme parks, and investment and programming activities in digital media and the
Internet.
(125)
Capital
Finance
CLL
products include loans, leases and other financial services to customers,
including manufacturers, distributors and end-users for a variety of
equipment and major capital assets. These assets include industrial-related
facilities and equipment; commercial and residential real estate; vehicles;
corporate aircraft; and equipment used in many industries, including the
construction, manufacturing, transportation, telecommunications and healthcare
industries.
GE Money
offers a range of financial products including private-label credit cards;
personal loans; bank cards; auto loans and leases; mortgages; debt
consolidation; home equity loans; deposits and other savings products; and small
and medium enterprise lending on a global basis.
Capital
Finance also provides financial products to airlines, aircraft operators,
owners, lenders and investors, including leases, aircraft purchasing and
trading, loans, engine/spare parts financing, fleet planning and financial
advisory services.
Financial
products to the global energy and water industries include structured and common
equity, debt, leasing, project finance, broad-based commercial finance and
investments in operating leases.
Consumer
& Industrial
Products
include major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, cooktops, dishwashers,
clothes washers and dryers, microwave ovens, room air conditioners and
residential water system products. These products are distributed both to retail
outlets and direct to consumers, mainly for the replacement market, and to
building contractors and distributors for new installations. Lighting products
include a wide variety of lamps and lighting fixtures, including light-emitting
diodes. Electrical equipment and control products include lighting and power
panels, switchgear, and circuit breakers. Products and services are sold in
North America and in global markets under various GE and private-label brands.
Revenues
|
Total
revenues(a)
|
Intersegment
revenues(b)
|
External
revenues
|
|||||||||||||||||||||||||
|
(In
millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||
|
Energy
Infrastructure
|
$
|
38,571
|
$
|
30,698
|
$
|
25,221
|
$
|
664
|
$
|
351
|
$
|
488
|
$
|
37,907
|
$
|
30,347
|
$
|
24,733
|
|||||||||
|
Technology
Infrastructure
|
46,316
|
42,801
|
37,687
|
273
|
113
|
216
|
46,043
|
42,688
|
37,471
|
||||||||||||||||||
|
NBC
Universal
|
16,969
|
15,416
|
16,188
|
89
|
35
|
52
|
16,880
|
15,381
|
16,136
|
||||||||||||||||||
|
Capital
Finance
|
67,008
|
66,301
|
56,378
|
1,333
|
1,128
|
1,013
|
65,675
|
65,173
|
55,365
|
||||||||||||||||||
|
Consumer
& Industrial
|
11,737
|
12,663
|
13,202
|
196
|
143
|
235
|
11,541
|
12,520
|
12,967
|
||||||||||||||||||
|
Corporate
items and eliminations
|
1,914
|
4,609
|
2,892
|
(2,555
|
)
|
(1,770
|
)
|
(2,004
|
)
|
4,469
|
6,379
|
4,896
|
|||||||||||||||
|
Total
|
$
|
182,515
|
$
|
172,488
|
$
|
151,568
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
182,515
|
$
|
172,488
|
$
|
151,568
|
|||||||||
|
(a)
|
Revenues
of GE businesses include income from sales of goods and services to
customers and other income.
|
|
(b)
|
Sales
from one component to another generally are priced at equivalent
commercial selling prices.
|
Revenues
from customers located in the United States were $85,301 million, $86,247
million and $81,057 million in 2008, 2007 and 2006, respectively. Revenues from
customers located outside the United States were $97,214 million, $86,241
million and $70,511 million in 2008, 2007 and 2006, respectively.
(126)
|
Assets(a)(b)
|
Property,
plant and
equipment
additions(c)
|
Depreciation
and
amortization
|
|||||||||||||||||||||||||
|
At
December 31
|
For
the years ended
December
31
|
For
the years ended
December
31
|
|||||||||||||||||||||||||
|
(In
millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Energy
Infrastructure
|
$
|
33,836
|
$
|
31,466
|
$
|
24,456
|
$
|
1,226
|
$
|
1,054
|
$
|
867
|
$
|
838
|
$
|
774
|
$
|
672
|
|||||||||
|
Technology
Infrastructure
|
58,967
|
57,670
|
49,641
|
1,395
|
1,954
|
1,389
|
1,520
|
1,569
|
1,269
|
||||||||||||||||||
|
NBC
Universal
|
33,781
|
33,089
|
31,425
|
131
|
306
|
352
|
354
|
357
|
361
|
||||||||||||||||||
|
Capital
Finance
|
572,903
|
583,965
|
491,000
|
15,313
|
17,832
|
14,489
|
10,238
|
8,864
|
6,971
|
||||||||||||||||||
|
Consumer
& Industrial
|
5,065
|
5,351
|
5,740
|
284
|
363
|
373
|
397
|
434
|
497
|
||||||||||||||||||
|
Corporate
items and eliminations
|
93,217
|
84,142
|
95,011
|
281
|
247
|
195
|
221
|
310
|
262
|
||||||||||||||||||
|
Total
|
$
|
797,769
|
$
|
795,683
|
$
|
697,273
|
$
|
18,630
|
$
|
21,756
|
$
|
17,665
|
$
|
13,568
|
$
|
12,308
|
$
|
10,032
|
|||||||||
|
(a)
|
Assets
of discontinued operations are included in Corporate items and
eliminations for all periods presented.
|
|
(b)
|
Total
assets of the Energy Infrastructure, Technology Infrastructure, NBC
Universal, Capital Finance and Consumer & Industrial operating
segments at December 31, 2008, include investment in and advances to
associated companies of $640 million, $711 million, $954 million, $18,694
million and $394 million, respectively, which contributed approximately
$91 million, $67 million, $134 million, $2,217 million and $33 million,
respectively, to segment pre-tax income for the year ended December 31,
2008. Aggregate summarized financial information for significant
associated companies assuming a 100% ownership interest included: total
assets of $154,825 million, primarily financing receivables of $85,554
million; total liabilities of $128,959 million, primarily bank deposits of
$65,514 million; revenues totaling $22,347 million; and net earnings
totaling $3,583 million.
|
|
(c)
|
Additions
to property, plant and equipment include amounts relating to principal
businesses purchased.
|
|
Interest
and other
financial
charges
|
Provision
(benefit)
for
income taxes
|
|||||||||||||||||
|
(In
millions)
|
2008
|
2007
|
2006
|
2008
|
2007
|
2006
|
||||||||||||
|
Capital
Finance
|
$
|
25,094
|
$
|
22,611
|
$
|
17,079
|
$
|
(1,914
|
)
|
$
|
1,225
|
$
|
1,560
|
|||||
|
Corporate items and
eliminations(a)
|
1,115
|
1,151
|
1,800
|
2,966
|
2,930
|
2,384
|
||||||||||||
|
Total
|
$
|
26,209
|
$
|
23,762
|
$
|
18,879
|
$
|
1,052
|
$
|
4,155
|
$
|
3,944
|
||||||
|
(a)
|
Included
amounts for Energy Infrastructure, Technology Infrastructure, NBC
Universal and Consumer & Industrial for which our measure of segment
profit excludes interest and other financial charges and income
taxes.
|
Property,
plant and equipment – net associated with operations based in the United States
were $27,667 million, $27,188 million and $25,699 million at year-end 2008, 2007
and 2006, respectively. Property, plant and equipment – net associated with
operations based outside the United States were $50,863 million, $50,700 million
and $44,929 million at year-end 2008, 2007 and 2006, respectively.
NOTE
28. 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. 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.
For
financial assets and liabilities, fair value is the price we would receive to
sell an asset or pay to transfer a liability in an orderly transaction with a
market participant at the measurement date. In the absence of active markets for
the identical assets or liabilities, such measurements involve developing
assumptions based on market observable data and, in the absence of such data,
internal information that is consistent with what market participants would use
in a hypothetical transaction that occurs at the measurement date.
(127)
Observable
inputs reflect market data obtained from independent sources, while unobservable
inputs reflect our market assumptions. Preference is given to observable inputs.
These two types of inputs create the following fair value
hierarchy:
|
Level 1 –
|
Quoted
prices for identical instruments in active
markets.
|
|
Level 2 –
|
Quoted
prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant
value drivers are observable.
|
|
Level 3 –
|
Significant
inputs to the valuation model are
unobservable.
|
We
maintain policies and procedures to value instruments using the best and most
relevant data available. In addition, we have risk management teams that review
valuation, including independent price validation for certain instruments.
Further, in other instances, we retain independent pricing vendors to assist in
valuing certain instruments.
The
following section describes the valuation methodologies we use to measure
different financial instruments at fair value.
Investments
in debt and equity securities
When
available, we use quoted market prices to determine the fair value of investment
securities, and they are included in Level 1. Level 1 securities primarily
include publicly-traded equity securities.
When
quoted market prices are unobservable, we use quotes from independent pricing
vendors based on recent trading activity and other relevant information
including market interest rate curves, referenced credit spreads and estimated
prepayment rates where applicable. These investments are included in Level 2 and
primarily comprise our portfolio of corporate fixed income, and government,
mortgage and asset-backed securities. In infrequent circumstances, our pricing
vendors may provide us with valuations that are based on significant
unobservable inputs, and in those circumstances we classify the investment
securities in Level 3.
As part
of our adoption of SFAS 157 in the first quarter of 2008, we conducted a review
of our primary pricing vendor, with the assistance of an accounting firm, to
validate that the inputs used in that vendor’s pricing process are deemed to be
market observable as defined in the standard. More specifically, we used a
combination of approaches to validate that the process used by the pricing
vendor is consistent with the requirements of the standard and that the levels
assigned to these valuations are reasonable. While we were not provided access
to proprietary models of the vendor, our review included on-site walk-throughs
of the pricing process, methodologies and control procedures for each asset
class for which prices are provided. Our review also included an examination of
the underlying inputs and assumptions for a sample of individual securities, a
process we have continued to perform for each reporting period. Based on this
examination, and the ongoing review performed, we believe that the valuations
used in our financial statements are reasonable and are appropriately classified
in the fair value hierarchy. As of December 31, 2008, the valuation provided by
pricing services was $26,654 million and was classified in Level 2. The
valuations provided by pricing services based on significant unobservable inputs
was insignificant, and those investment securities are classified as Level
3.
Retained
interests in securitizations are valued using a discounted cash flow model that
considers the underlying structure of the securitization and estimated net
credit exposure, prepayment assumptions, discount rates and expected life.
Investment securities priced using non-binding broker quotes and retained
interests are included in Level 3. We use non-binding broker quotes as our
primary basis for valuation when there is limited, or no, relevant market
activity for a specific instrument or for other instruments that share similar
characteristics. We have not adjusted the prices we have obtained. Level 3
investment securities valued using non-binding broker quotes totaled $2,074
million at December 31, 2008, and were classified as available-for-sale
securities. Level 3 retained interests totaled $6,356 million at December 31,
2008.
(128)
We
receive one quote for Level 2 and Level 3 securities where third-party quotes
are used as our basis for fair value measurement. As is the case with our
primary pricing vendor, third-party providers of quotes do not provide access to
their proprietary valuation models, inputs and assumptions. Accordingly, our
risk management personnel conduct internal reviews of pricing for all such
investment securities at least quarterly to ensure reasonableness of valuations
used in our financial statements. These reviews are designed to identify prices
that appear stale, those that have changed significantly from prior valuations,
and other anomalies that may indicate that a price may not be accurate. We also
follow established routines for reviewing and reconfirming valuations with the
pricing provider, if deemed appropriate. In addition, the pricing vendor has an
established challenge process in place for all security valuations, which
facilitates identification and resolution of potentially erroneous prices. Based
on the information available, we believe that the fair values provided by the
brokers are consistent with the principles of SFAS 157.
Private
equity investments held in investment company affiliates are initially valued at
cost. Valuations are reviewed at the end of each quarter utilizing available
market data to determine whether or not any fair value adjustments are
necessary. Such market data include any comparable public company trading
multiples. Unobservable inputs include company-specific fundamentals and other
third-party transactions in that security. Our valuation methodology for private
equity investments is applied consistently, and these investments are generally
included in Level 3.
Derivatives
We use
closing prices for derivatives included in Level 1, which are traded either on
exchanges or liquid over-the-counter markets.
The
majority of our derivatives portfolio is valued using internal models. The
models maximize the use of market observable inputs including interest rate
curves and both forward and spot prices for currencies and commodities.
Derivative assets and liabilities included in Level 2 primarily represent
interest rate swaps, cross-currency swaps and foreign currency and commodity
forward and option contracts.
Derivative
assets and liabilities included in Level 3 primarily represent interest rate
products that contain embedded optionality or prepayment features.
Loans
When
available, we use observable market data, including pricing on recent closed
market transactions, to value loans which are included in Level 2. When this
data is unobservable, we use valuation methodologies using current market
interest rate data adjusted for inherent credit risk, and such loans are
included in Level 3. When appropriate, loans are valued using collateral values
as a practical expedient.
Effective
January 1, 2008, we adopted SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities. Upon adoption, we elected to report
$172 million of commercial mortgage loans at fair value in order to have them on
the same accounting basis (measured at fair value through earnings) as the
derivatives economically hedging these loans.
The
following table presents our assets and liabilities measured at fair value on a
recurring basis at December 31, 2008. Included in the table are investment
securities of $21,967 million, primarily supporting obligations to annuitants
and policyholders in our run-off insurance operations, and $8,190 million
supporting obligations to holders of guaranteed investment contracts. Such
securities are primarily investment grade. In addition, the table includes
$12,642 million and $5,236 million of derivative assets and liabilities,
respectively, with highly rated counterparties, primarily used for risk
management purposes. Also included are retained interests in securitizations
totaling $6,356 million.
(129)
|
December
31, 2008 (In millions)
|
Level
1
|
Level
2
|
Level
3
|
FIN
39
netting(a)
|
Net
balance
|
||||||||||
|
Assets
|
|||||||||||||||
|
Investment
securities
|
$
|
1,158
|
$
|
27,332
|
$
|
12,956
|
$
|
–
|
$
|
41,446
|
|||||
|
Derivatives(b)
|
–
|
18,911
|
1,142
|
(7,411
|
)
|
12,642
|
|||||||||
|
Other(c)
|
1
|
288
|
1,105
|
–
|
1,394
|
||||||||||
|
Total
|
$
|
1,159
|
$
|
46,531
|
$
|
15,203
|
$
|
(7,411
|
)
|
$
|
55,482
|
||||
|
Liabilities
|
|||||||||||||||
|
Derivatives
|
$
|
2
|
$
|
12,643
|
$
|
166
|
$
|
(7,575
|
)
|
$
|
5,236
|
||||
|
Other(d)
|
–
|
1,031
|
–
|
–
|
1,031
|
||||||||||
|
Total
|
$
|
2
|
$
|
13,674
|
$
|
166
|
$
|
(7,575
|
)
|
$
|
6,267
|
||||
|
(a)
|
FIN
39, Offsetting of
Amounts Related to Certain Contracts, permits the netting of
derivative receivables and derivative 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 our non-performance
risk. At December 31, 2008, the adjustment for our non-performance risk
was a gain of $177 million.
|
|
(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 table presents the changes in Level 3 instruments measured on a
recurring basis for the year ended December 31, 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 year ended December 31, 2008
|
(In
millions)
|
January 1,
2008
|
Net
realized/
unrealized
gains
(losses)
included
in
earnings(a)
|
Net
realized/
unrealized
gains
(losses)
included
in
accumulated
nonowner
changes
other
than
earnings
|
Purchases,
issuances
and
settlements
|
Transfers
in
and/or
out
of
Level 3(b)
|
December 31,
2008
|
Net
change in
unrealized
gains
(losses)
relating
to
instruments
still
held at
December 31,
2008(c)
|
||||||||||||||||||||||||||||
|
Investment
securities
|
$
|
12,447
|
$
|
430
|
$
|
(1,586
|
)
|
$
|
671
|
$
|
994
|
$
|
12,956
|
$
|
7
|
||||||||||||||||||||
|
Derivatives(d)(e)
|
265
|
866
|
141
|
(256
|
)
|
(13
|
)
|
1,003
|
636
|
||||||||||||||||||||||||||
|
Other
|
1,330
|
(157
|
)
|
(29
|
)
|
(90
|
)
|
51
|
1,105
|
(165
|
)
|
||||||||||||||||||||||||
|
Total
|
$
|
14,042
|
$
|
1,139
|
$
|
(1,474
|
)
|
$
|
325
|
$
|
1,032
|
$
|
15,064
|
$
|
478
|
||||||||||||||||||||
|
(a)
|
Earnings
effects are primarily included in the “GECS revenues from services” and
“Interest and other financial charges” captions in the Statement of
Earnings.
|
|
(b)
|
Transfers
in and out of Level 3 are considered to occur at the beginning of the
period. Transfers into Level 3 were a result of increased use of
non-binding broker quotes that could not be validated with other market
observable data, resulting from continued deterioration in the credit
markets.
|
|
(c)
|
Represented
the amount of total gains or losses for the period included in earnings
attributable to the change in unrealized gains (losses) relating to assets
and liabilities classified as Level 3 that are still held at December 31,
2008.
|
|
(d)
|
Earnings
from Derivatives were partially offset by $760 million in losses from
related derivatives included in Level 2 and $4 million in losses from
underlying debt obligations in qualifying fair value
hedges.
|
|
(e)
|
Represented
derivative assets net of derivative liabilities and included cash accruals
of $27 million not reflected in the fair value hierarchy
table.
|
(130)
Certain
assets that are carried on our Statement of Financial Position at historical
cost, require fair value charges to earnings when they are deemed to be
impaired. As these impairment charges are non-recurring, they are not included
in the preceding tables.
Included
in this category are certain loans that have been reduced for the fair value of
their underlying collateral when deemed impaired, and cost and equity method
investments that are written down to fair value when their declines are
determined to be other-than-temporary. At December 31, 2008, these amounts were
$48 million identified as Level 2 and $3,145 million identified as Level 3. Of
assets still held at December 31, 2008, we recognized $587 million, pre-tax, of
losses related to non-recurring fair value measurements of loans, and $495
million, pre-tax, of other-than-temporary impairments of cost and equity method
investments during 2008.
NOTE
29. FINANCIAL INSTRUMENTS
|
2008
|
2007
|
|||||||||||||||||
|
Assets
(liabilities)
|
Assets
(liabilities)
|
|||||||||||||||||
|
December
31 (In millions)
|
Notional
amount
|
Carrying
amount
(net)
|
Estimated
fair
value
|
Notional
amount
|
Carrying
amount
(net)
|
Estimated
fair
value
|
||||||||||||
|
GE
|
||||||||||||||||||
|
Assets
|
||||||||||||||||||
|
Investments
and notes receivable
|
$
|
(a)
|
$
|
269
|
$
|
269
|
$
|
(a)
|
$
|
538
|
$
|
538
|
||||||
|
Liabilities
|
||||||||||||||||||
|
Borrowings(b)
|
(a)
|
(12,202
|
)
|
(12,267
|
)
|
(a)
|
(15,762
|
)
|
(15,819
|
)
|
||||||||
|
GECS
|
||||||||||||||||||
|
Assets
|
||||||||||||||||||
|
Loans
|
(a)
|
305,376
|
292,797
|
(a)
|
309,623
|
307,425
|
||||||||||||
|
Other
commercial mortgages
|
(a)
|
1,501
|
1,427
|
(a)
|
4,891
|
4,939
|
||||||||||||
|
Loans
held for sale
|
(a)
|
3,640
|
3,670
|
(a)
|
3,808
|
3,809
|
||||||||||||
|
Other financial
instruments(c)
|
(a)
|
2,637
|
2,810
|
(a)
|
2,764
|
3,150
|
||||||||||||
|
Liabilities
|
||||||||||||||||||
|
Borrowings(b)(d)
|
(a)
|
(514,601
|
)
|
(504,439
|
)
|
(a)
|
(500,922
|
)
|
(503,607
|
)
|
||||||||
|
Investment
contract benefits
|
(a)
|
(4,212
|
)
|
(4,536
|
)
|
(a)
|
(4,536
|
)
|
(4,914
|
)
|
||||||||
|
Guaranteed
investment contracts
|
(a)
|
(10,828
|
)
|
(10,677
|
)
|
(a)
|
(11,705
|
)
|
(11,630
|
)
|
||||||||
|
Insurance – credit
life(e)
|
1,165
|
(44
|
)
|
(31
|
)
|
1,500
|
(35
|
)
|
(24
|
)
|
||||||||
|
(a)
|
These
financial instruments do not have notional amounts.
|
|
(b)
|
See
Note 18.
|
|
(c)
|
Principally
cost method investments.
|
|
(d)
|
Included
effects of interest rate and cross-currency
derivatives.
|
|
(e)
|
Net
of reinsurance of $3,103 million and $2,815 million at December 31, 2008
and 2007, respectively.
|
Assets
and liabilities not carried at fair value in our Statement of Financial Position
are discussed below. Consistent with SFAS 107, Disclosure about Fair Value of
Financial Instruments, the disclosure excludes finance leases and
non-financial assets and liabilities. Apart from certain of our borrowings and
certain marketable securities, few of the instruments discussed below are
actively traded and their fair values must often be determined using financial
models. Realization of the fair value of these instruments depends upon market
forces beyond our control, including marketplace liquidity.
A
description of how we estimate fair values follows. Estimates of fair value at
December 31, 2008, were determined in accordance with SFAS 107, as amended by
SFAS 157.
Loans
Based on
quoted market prices, recent transactions and/or discounted future cash flows,
using rates we would charge to similar borrowers with similar
maturities.
Borrowings
Valuation
methodologies using current market interest rate data which are comparable to
market quotes adjusted for our non-performance risk.
(131)
Investment
contract benefits
Based on
expected future cash flows, discounted at currently offered rates for immediate
annuity contracts or cash surrender values for single premium deferred
annuities.
Guaranteed
investment contracts
Based on
valuation methodologies using current market interest rate data, adjusted for
our non-performance risk.
All
other instruments
Based on
observable market transactions, valuation methodologies using current market
interest rate data adjusted for inherent credit risk and/or quoted market
prices.
Assets
and liabilities that are reflected in the accompanying financial statements at
fair value are not included in the above disclosures; such items include cash
and equivalents, investment securities and derivative financial
instruments.
Additional
information about certain categories in the table above follows.
Insurance
– credit life
Certain
insurance affiliates, primarily in GE Money, issue credit life insurance
designed to pay the balance due on a loan if the borrower dies before the loan
is repaid. As part of our overall risk management process, we cede to third
parties a portion of this associated risk, but are not relieved of our primary
obligation to policyholders.
Loan
commitments
|
Notional
amount
|
||||||
|
December
31 (In millions)
|
2008
|
2007
|
||||
|
Ordinary
course of business lending commitments(a)(b)
|
$
|
8,507
|
$
|
11,731
|
||
|
Unused
revolving credit lines(c)
|
||||||
|
Commercial
|
25,011
|
24,554
|
||||
|
Consumer
– principally credit cards
|
252,867
|
477,285
|
||||
|
(a)
|
Excluded
investment commitments of $3,501 million and $4,864 million as of December
31, 2008 and 2007, respectively.
|
|
(b)
|
Included
a $1,067 million secured commitment associated with an arrangement that
can increase to a maximum of $4,943 million based on the asset volume
under the arrangement.
|
|
(c)
|
Excluded
inventory financing arrangements, which may be withdrawn at our option, of
$14,503 million and $14,654 million as of December 31, 2008 and 2007,
respectively.
|
Derivatives
and hedging
We
conduct our business activities in diverse markets around the world, including
countries where obtaining local funding is sometimes inefficient. The nature of
our activities exposes us to changes in interest rates and currency exchange
rates. We manage such risks using various techniques including issuing debt
whose terms correspond to terms of the funded assets, as well as combinations of
debt and derivatives that achieve our objectives. We also are exposed to various
commodity price risks and address certain of these risks with commodity
contracts. By policy, we do not use derivatives for speculative purposes. We
value derivatives that are not exchange-traded with internal market-based
valuation models. When necessary, we also obtain information from our derivative
counterparties to validate our models and to value the few products that our
internal models do not address.
We use
interest rate swaps, currency derivatives and commodity derivatives to reduce
the variability of expected future cash flows associated with variable rate
borrowings and commercial purchase and sale transactions, including commodities.
We use interest rate swaps, currency swaps and interest rate and currency
forwards to hedge the fair value effects of interest rate and currency exchange
rate changes on local and non-functional currency denominated fixed-rate
borrowings and certain types of fixed-rate assets. We use currency swaps and
forwards to protect our net investments in global operations conducted in
non-U.S. dollar currencies. We intend all of these positions to qualify as
hedges and to be accounted for as hedges.
(132)
We use
swaps, futures and option contracts, including caps, floors and collars, as
economic hedges of changes in interest rates, currency exchange rates and equity
prices on certain types of assets and liabilities. We sometimes use credit
default swaps to economically hedge the credit risk of various counterparties
with which we have entered into loan or leasing arrangements. We occasionally
obtain equity warrants as part of sourcing or financing transactions. Although
these instruments are derivatives, their economic risks are similar to, and
managed on the same basis as, risks of other equity instruments we hold. These
instruments are marked to market through earnings.
Earnings
effects of derivatives designated as hedges
The
following table provides information about the earnings effects of derivatives
designated and qualifying as hedges.
Pre-tax
gains (losses)
|
December
31 (In millions)
|
2008
|
2007
|
2006
|
||||||
|
Cash
flow hedges
|
|||||||||
|
Ineffectiveness
|
$
|
8
|
$
|
(3
|
)
|
$
|
10
|
||
|
Amounts
excluded from the measure of effectiveness
|
5
|
(17
|
)
|
(16
|
)
|
||||
|
Fair
value hedges
|
|||||||||
|
Ineffectiveness
|
(600
|
)
|
7
|
(47
|
)
|
||||
|
Amounts
excluded from the measure of effectiveness
|
(26
|
)
|
(13
|
)
|
33
|
Ineffectiveness
primarily related to changes in the present value of the initial credit spread
over the benchmark interest rate associated with hedges of our fixed rate
borrowings.
In 2008,
2007 and 2006, 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.
Guarantees
of Derivatives
We do
not sell credit default swaps; however, as a part of our risk management
services, we provide performance guarantees to third-party financial
institutions related to plain vanilla interest rate swaps on behalf of certain
customers related to variable rate loans we have extended to them. The
underwriting risk inherent in these arrangements is essentially similar to that
of a fixed rate loan. Under these arrangements, the guarantee is secured,
usually by the asset being purchased or financed, or by other assets of the
guaranteed party. In addition, these agreements are underwritten to provide for
collateral value that exceeds the combination of the loan amount and the initial
expected future exposure of the derivative. These credit support arrangements
mature on the same date as the related financing arrangements or transactions
and are across a broad spectrum of diversified industries and companies. The
fair value of our guarantee is $28 million at December 31, 2008. Because we are
guaranteeing the performance of the customer under these arrangements, our
exposure to loss at any point in time is limited to the fair value of the
customer’s derivative contracts that are in a liability position. The aggregate
termination value of such contracts at December 31, 2008, was $386 million
before consideration of any offsetting effect of collateral. At December 31,
2008, 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 guarantee. If we assumed that, on January 1, 2009, interest
rates moved unfavorably by 100 basis points across the yield curve (a “parallel
shift” in that curve), the effect on the fair value of such contracts, without
considering any potential offset of the underlying collateral, would have been
an increase of $161 million. Given our strict underwriting criteria, we believe
the likelihood that we will be required to perform under the guarantee is
remote.
Additional
information regarding our use of derivatives is provided in Note 18 and Note
23.
Counterparty
credit risk
We
manage counterparty credit risk, the risk that counterparties will default and
not make payments to us according to the terms of the agreements, on an
individual counterparty basis. Thus, when a legal right of offset exists, we net
certain exposures by counterparty and include the value of collateral to
determine the amount of ensuing exposure. When net exposure to a counterparty,
based on the current market values of agreements and collateral, exceeds credit
exposure limits (see following table), we take action to reduce exposure. Such
actions include prohibiting additional transactions with the counterparty,
requiring collateral from the counterparty (as described below) and terminating
or restructuring transactions.
(133)
Swaps
are required to be executed under master agreements containing mutual credit
downgrade provisions that provide the ability to require assignment or
termination in the event either party is downgraded below A3 or A–. In certain
cases we have entered into 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 evaluate credit risk exposures and compliance with credit
exposure limits net of such collateral.
Fair
values of our derivatives can change significantly from period to period based
on, among other factors, market movements and changes in our positions. At
December 31, 2008, our exposure to counterparties, after consideration of
netting arrangements and collateral, was about $1,800 million.
Following
is GECS policy relating to initial credit rating requirements and to exposure
limits to counterparties.
Counterparty
Credit Criteria
|
Credit
rating
|
||||
|
Moody’s
|
S&P
|
|||
|
Foreign
exchange forwards and other derivatives less
|
||||
|
than
one year
|
P-1
|
A-1
|
||
|
All
derivatives between one and five years
|
Aa3
|
(a)
|
AA-
|
(a)
|
|
All
derivatives greater than five years
|
Aaa
|
(a)
|
AAA
|
(a)
|
|
(a)
|
Counterparties
that have an obligation to provide collateral to cover credit exposure in
accordance with a credit support agreement must have a minimum A3/A-
rating.
|
Exposure
Limits
|
(In
millions)
|
||||||
|
Minimum
rating
|
Exposure(a)
|
|||||
|
Without
|
||||||
|
With
collateral
|
collateral
|
|||||
|
Moody’s
|
S&P
|
arrangements
|
arrangements
|
|||
|
Aaa
|
AAA
|
$100
|
$75
|
|||
|
Aa3
|
AA–
|
50
|
50
|
|||
|
A3
|
A–
|
5
|
–
|
|||
|
(a)
|
For
derivatives with maturities less than one year, counterparties are
permitted to have unsecured exposure up to $150 million with a minimum
rating of A-1/P-1. Exposure to a counterparty is determined net of
collateral.
|
NOTE
30. 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.
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 consolidated or unconsolidated VIEs in either 2008 or 2007. We do not
have implicit support arrangements with any VIEs.
(134)
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. 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.
Consolidated
Variable Interest Entities
Upon
adoption of FIN 46 and FIN 46(R) on July 1, 2003 and January 1, 2004,
respectively, we consolidated certain VIEs with $54.0 billion of assets and
$52.6 billion of liabilities, which are further described below. At December 31,
2008, assets and liabilities of those VIEs, and additional VIEs consolidated as
a result of subsequent acquisitions of financial companies, totaled $26,626
million and $21,256 million, respectively (at December 31, 2007, assets and
liabilities were $32,382 million and $24,342 million,
respectively).
The VIEs
included in our consolidated financial statements include the
following:
|
·
|
Securitization
entities that hold financing receivables and other financial assets. Since
they were consolidated in 2003, these assets have continued to run off;
totaled $4,000 million at December 31, 2008; and are included in
Note 12 ($5,013 million in 2007). There has been no significant
difference between the performance of these financing receivables and our
on-book receivables on a blended basis. The liabilities of these
securitization entities, which consist primarily of commercial paper,
totaled $3,868 million at December 31, 2008, and are included in Note 18
($4,834 million in 2007). Contractually the cash flows from these
financing receivables must first be used to pay down outstanding
commercial paper and interest thereon as well as other expenses of the
entity. Excess cash flows are available to GE. The creditors of these
entities have no claim on the other assets of
GE.
|
If the
short-term credit rating of GE Capital or these entities were reduced below
A–1/P–1, we would be required to provide substitute liquidity for those entities
or provide funds to retire the outstanding commercial paper. The maximum net
amount that we would be required to provide in the event of such a downgrade is
determined by contract, and totaled $3,753 million at December 31, 2008. As the
borrowings of these entities are already reflected in our consolidated Statement
of Financial Position, there would be no change in our debt if this were to
occur.
|
·
|
Trinity,
a group of sponsored special purpose entities, which invests in a
portfolio of mainly investment-grade investment securities using proceeds
raised from guaranteed investment contracts (GICs) it issues to investors
(principally municipalities). At December 31, 2008, these entities held
$8,190 million of investment securities, included in Note 9, and $1,002
million of cash and other assets ($11,101 million and $517 million,
respectively, at December 31, 2007). The associated guaranteed investment
contract liabilities, included in Note 19, were $10,828 million and
$11,705 million at the end of December 31, 2008 and 2007,
respectively.
|
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 would be
required to provide approximately $3,493 million of capital to such entities as
of December 31, 2008, 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. As of December 31,
2008, the value of these entities’ liabilities was $10,749 million and the fair
value of their assets was $9,191 million (which included unrealized losses on
investment securities of $2,055 million). With respect to these investment
securities, 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 maturity. As the borrowings of these entities are already
reflected in our consolidated Statement of Financial Position, there would be no
change in our debt if this were to occur.
|
·
|
Penske Truck Leasing Co., L.P.
(Penske), a rental truck leasing joint venture. The total consolidated
assets and liabilities of Penske at December 31, 2008, were $7,444 million
and $1,339 million, respectively, ($8,075 million and $1,482 million at
December 31, 2007, respectively). Penske’s main consolidated asset is
property, plant and equipment leased to others, included in Note 14, which
totaled $5,499 million at December 31, 2008, ($6,100 million at December
31, 2007). There are no
recourse arrangements between GE and
Penske.
|
(135)
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.
Off-Balance
Sheet Entities
The vast
majority of our involvement with unconsolidated VIEs relates to our
securitization activities and is detailed in the table below.
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 equity 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
totaled $2,871 million at year-end 2008 and are classified in two captions in
our financial statements. At December 31, 2008, “All other assets” included
investments in entities accounted for under either the equity method or the cost
method, which totaled $1,897 million ($1,089 million at December 31, 2007). In
addition, at December 31, 2008, we held financing receivables, included in Note
12, totaling $974 million ($567 million at December 31, 2007) representing debt
financing provided to these VIEs. Our maximum exposure to loss related to such
entities at December 31, 2008, was $4,030 million ($2,559 million at December
31, 2007), and includes our investment in the unconsolidated VIEs and our
contractual obligations to fund new investments by the entities. None of these
investments is individually significant.
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 in exchange for cash, which is funded by beneficial
interests issued by the QSPE to third parties and our retained interests in the
assets transferred.
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.
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 9.
(136)
Financing
receivables transferred to securitization entities that remain outstanding and
our retained interests in those financing receivables at December 31, 2008 and
2007, follows.
|
December
31 (In millions)
|
Equipment
|
(a)(b)
|
Commercial
real
estate
|
(b)
|
Credit
card
receivables
|
Other
assets
|
(b)
|
Total
assets
|
|||||||||
|
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
|
||||||||||||
|
2007
|
|||||||||||||||||
|
Asset
amount outstanding
|
$
|
15,566
|
$
|
9,244
|
$
|
26,248
|
$
|
5,067
|
$
|
56,125
|
|||||||
|
Included
within the amount above
|
|||||||||||||||||
|
are
retained interests of:
|
|||||||||||||||||
|
Financing
receivables(c)
|
764
|
–
|
3,455
|
–
|
4,219
|
||||||||||||
|
Investment
securities
|
763
|
454
|
3,922
|
535
|
5,674
|
||||||||||||
|
(a)
|
Includes
inventory floorplan receivables.
|
|
(b)
|
In
certain equipment and commercial real estate 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 December 31, 2008
and 2007, liquidity support amounted to $2,143 million and $2,810 million,
respectively. Credit support amounted to $2,164 million and $2,804 million
at December 31, 2008 and 2007, respectively. Liabilities with recourse
obligations related to off-balance sheet assets were $8 million and $3
million at December 31, 2008 and 2007, respectively. The maximum exposure
to loss under these obligations was $124 million and $99 million at
December 31, 2008 and 2007, respectively.
|
|
(c)
|
Uncertificated
sellers interests.
|
We have
not provided non-contractual support to any QSPEs in 2008 or 2007. We do not
have any implicit support arrangements with QSPEs.
(137)
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 28. 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 the
same as 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 December
31, 2008 and 2007 were:
|
(In
millions)
|
Equipment
|
Commercial
real
estate
|
Credit
card
receivables
|
Other
assets
|
|||||||||||||
|
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
|
$
|
91
|
$
|
1
|
$
|
1,815
|
$
|
5
|
|||||||||
|
Delinquencies
|
139
|
56
|
1,833
|
80
|
|||||||||||||
|
2007
|
|||||||||||||||||
|
Discount
rate(a)
|
13.7
|
%
|
15.2
|
%
|
14.8
|
%
|
14.9
|
%
|
|||||||||
|
Effect
of
|
|||||||||||||||||
|
10%
adverse change
|
$
|
(11
|
)
|
$
|
(20
|
)
|
$
|
(36
|
)
|
$
|
(3
|
)
|
|||||
|
20%
adverse change
|
(22
|
)
|
(38
|
)
|
(72
|
)
|
(6
|
)
|
|||||||||
|
Prepayment
rate(a)(b)
|
16.4
|
%
|
3.4
|
%
|
10.8
|
%
|
35.1
|
%
|
|||||||||
|
Effect
of
|
|||||||||||||||||
|
10%
adverse change
|
$
|
(7
|
)
|
$
|
(5
|
)
|
$
|
(80
|
)
|
$
|
(2
|
)
|
|||||
|
20%
adverse change
|
(12
|
)
|
(9
|
)
|
(148
|
)
|
(4
|
)
|
|||||||||
|
Estimate
of credit losses(a)
|
1.2
|
%
|
1.0
|
%
|
9.0
|
%
|
0.1
|
%
|
|||||||||
|
Effect
of
|
|||||||||||||||||
|
10%
adverse change
|
$
|
(5
|
)
|
$
|
(8
|
)
|
$
|
(110
|
)
|
$
|
(1
|
)
|
|||||
|
20%
adverse change
|
(9
|
)
|
(13
|
)
|
(222
|
)
|
(1
|
)
|
|||||||||
|
Remaining
weighted average
|
|||||||||||||||||
|
lives
(in months)
|
16
|
53
|
8
|
24
|
|||||||||||||
|
Net
credit losses
|
$
|
55
|
$
|
1
|
$
|
941
|
$
|
–
|
|||||||||
|
Delinquencies
|
53
|
12
|
1,514
|
27
|
|||||||||||||
|
(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).
|
(138)
Activity
related to retained interests classified as investment securities in our
consolidated financial statements follows.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Cash
flows on transfers
|
|||||||||
|
Proceeds
from new transfers
|
$
|
6,655
|
$
|
22,767
|
$
|
19,288
|
|||
|
Proceeds
from collections reinvested in revolving period transfers
|
70,144
|
61,625
|
46,944
|
||||||
|
Cash
flows on retained interests recorded as investment
securities
|
5,935
|
4,265
|
2,964
|
||||||
|
Effect
on GECS revenues from services
|
|||||||||
|
Net
gain on sale
|
$
|
1,133
|
$
|
1,805
|
$
|
1,187
|
|||
|
Change
in fair value on SFAS 155 retained interests
|
(113
|
)
|
(102
|
)
|
–
|
||||
|
Other-than-temporary
impairments
|
(330
|
)
|
(114
|
)
|
(37
|
)
|
Derivative
activities
The
QSPEs use derivatives to manage 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 December 31, 2008, the fair value
of such derivative contracts was $752 million ($134 million at December 31,
2007). We have no other derivatives arrangements with QSPEs or other
VIEs.
Servicing
activities
As part
of a securitization transaction, we may provide servicing in exchange for a
market-based fee that is determined on principal balances. Where the fee does
not represent market-based compensation for these services, a servicing asset or
liability is recorded, as appropriate. The fair value of the servicing asset or
liability is subject to credit, prepayment and interest rate risk. Servicing
assets and liabilities are amortized to earnings in proportion to and over the
period of servicing activity. The amount of our servicing assets and liabilities
was insignificant at December 31, 2008 and 2007. We received servicing fees
from QSPEs of $641 million, $566 million and $381 million in 2008, 2007 and
2006, respectively.
When we
provide servicing as an “Aaa” rated provider we are contractually permitted to
commingle cash collected from customers on financing receivables sold to
investors with our own cash prior to payment to a QSPE. At December 31, 2008,
the balance owed to QSPEs from such collections and included in cash and
equivalents was $4,446 million ($5,121 million at December 31, 2007). Balances
owed by QSPE to GE at December 31, 2008, and included in other GECS receivables,
were $2,346 million, principally for receivable purchases ($3,507 million at
December 31, 2007).
NOTE
31. COMMITMENTS AND GUARANTEES
Commitments,
including guarantees
In our
Aviation business of Technology Infrastructure, we had committed to provide
financial assistance on $1,291 million of future customer acquisitions of
aircraft equipped with our engines, including commitments made to airlines in
2008 for future sales under our GE90 and GEnx engine campaigns. The GECAS
business of Capital Finance had placed multiple-year orders for various Boeing,
Airbus and other aircraft with list prices approximating $17,248 million and
secondary orders with airlines for used aircraft of approximately $1,653 million
at December 31, 2008.
At
December 31, 2008, NBC Universal had $8,102 million of commitments to acquire
film and television programming, including U.S. television rights to future
Olympic Games and National Football League games, contractual commitments under
various creative talent arrangements and various other arrangements requiring
payments through 2014.
At
December 31, 2008, we were committed under the following guarantee arrangements
beyond those provided on behalf of securitization entities. See Note
30.
(139)
|
·
|
Credit Support. We have
provided $9,151 million of credit support on behalf of certain customers
or associated companies, predominantly joint ventures and partnerships,
using arrangements such as standby letters of credit and performance
guarantees. These arrangements enable these customers and associated
companies to execute transactions or obtain desired financing arrangements
with third parties. Should the customer or associated company fail to
perform under the terms of the transaction or financing arrangement, we
would be required to perform on their behalf. Under most such
arrangements, our guarantee is secured, usually by the asset being
purchased or financed, but possibly by certain other assets of the
customer or associated company. The length of these credit support
arrangements parallels the length of the related financing arrangements or
transactions. The liability for such credit support was $72 million for
December 31, 2008.
|
|
·
|
Indemnification
Agreements. These are agreements that require us to fund up to $693
million under residual value guarantees on a variety of leased equipment.
Under most of our residual value guarantees, our commitment is secured by
the leased asset at termination of the lease. The liability for these
indemnification agreements was $332 million at December 31, 2008. We had
$1,742 million of other indemnification commitments arising primarily from
sales of businesses or assets.
|
|
·
|
Contingent
Consideration. These are agreements to provide additional
consideration in a business combination to the seller if contractually
specified conditions related to the acquired entity are achieved. At
December 31, 2008, we had total maximum exposure for future estimated
payments of $118 million, of which none was earned and
payable.
|
Our
guarantees are provided in the ordinary course of business. We underwrite these
guarantees considering economic, liquidity and credit risk of the counterparty.
We believe that the likelihood is remote that any such arrangements could have a
significant adverse effect on our financial position, results of operations or
liquidity. We record liabilities for guarantees at estimated fair value,
generally the amount of the premium received, or if we do not receive a premium,
the amount based on appraisal, observed market values or discounted cash flows.
Any associated expected recoveries from third parties are recorded as other
receivables, not netted against the liabilities.
At
December 31, 2008 and 2007, the likelihood that we will be called upon to
perform on these guarantees is remote.
Product
Warranties
We
provide for estimated product warranty expenses when we sell the related
products. Because warranty estimates are forecasts that are based on the best
available information – mostly historical claims experience – claims costs
may differ from amounts provided. An analysis of changes in the liability for
product warranties follows.
|
(In
millions)
|
2008
|
2007
|
2006
|
||||||
|
Balance
at January 1
|
$
|
1,541
|
$
|
1,339
|
$
|
1,240
|
|||
|
Current-year
provisions
|
1,038
|
827
|
829
|
||||||
|
Expenditures(a)
|
(917
|
)
|
(763
|
)
|
(729
|
)
|
|||
|
Other
changes
|
13
|
138
|
(1
|
)
|
|||||
|
Balance
at December 31
|
$
|
1,675
|
$
|
1,541
|
$
|
1,339
|
|||
|
(a)
|
Primarily
related to Technology Infrastructure and Energy
Infrastructure.
|
(140)
NOTE
32. QUARTERLY INFORMATION (UNAUDITED)
|
First
quarter
|
Second
quarter
|
Third
quarter
|
Fourth
quarter
|
|||||||||||||||||||||
|
(In
millions; per-share amounts in dollars)
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Consolidated
operations
|
||||||||||||||||||||||||
|
Earnings
from continuing operations
|
$
|
4,351
|
$
|
4,911
|
$
|
5,394
|
$
|
5,608
|
$
|
4,477
|
$
|
5,111
|
$
|
3,867
|
$
|
6,827
|
||||||||
|
Earnings
(loss) from discontinued operations
|
(47
|
)
|
(340
|
)
|
(322
|
)
|
(226
|
)
|
(165
|
)
|
448
|
(145
|
)
|
(131
|
)
|
|||||||||
|
Net
earnings
|
$
|
4,304
|
$
|
4,571
|
$
|
5,072
|
$
|
5,382
|
$
|
4,312
|
$
|
5,559
|
$
|
3,722
|
$
|
6,696
|
||||||||
|
Preferred
stock dividends declared
|
–
|
–
|
–
|
–
|
–
|
–
|
(75
|
)
|
–
|
|||||||||||||||
|
Net
earnings attributable to common
|
||||||||||||||||||||||||
|
shareowners
|
$
|
4,304
|
$
|
4,571
|
$
|
5,072
|
$
|
5,382
|
$
|
4,312
|
$
|
5,559
|
$
|
3,647
|
$
|
6,696
|
||||||||
|
Per-share
amounts – earnings from
|
||||||||||||||||||||||||
|
continuing
operations
|
||||||||||||||||||||||||
|
Diluted
earnings per share
|
$
|
0.43
|
$
|
0.48
|
$
|
0.54
|
$
|
0.54
|
$
|
0.45
|
$
|
0.50
|
$
|
0.36
|
$
|
0.68
|
||||||||
|
Basic
earnings per share
|
0.44
|
0.48
|
0.54
|
0.55
|
0.45
|
0.50
|
0.36
|
0.68
|
||||||||||||||||
|
Per-share
amounts – earnings (loss)
|
||||||||||||||||||||||||
|
from
discontinued operations
|
||||||||||||||||||||||||
|
Diluted
earnings per share
|
–
|
(0.03
|
)
|
(0.03
|
)
|
(0.02
|
)
|
(0.02
|
)
|
0.04
|
(0.01
|
)
|
(0.01
|
)
|
||||||||||
|
Basic
earnings per share
|
–
|
(0.03
|
)
|
(0.03
|
)
|
(0.02
|
)
|
(0.02
|
)
|
0.04
|
(0.01
|
)
|
(0.01
|
)
|
||||||||||
|
Per-share
amounts – net earnings
|
||||||||||||||||||||||||
|
Diluted
earnings per share
|
0.43
|
0.44
|
0.51
|
0.52
|
0.43
|
0.54
|
0.35
|
0.66
|
||||||||||||||||
|
Basic
earnings per share
|
0.43
|
0.44
|
0.51
|
0.52
|
0.43
|
0.55
|
0.35
|
0.67
|
||||||||||||||||
|
Selected
data
|
||||||||||||||||||||||||
|
GE
|
||||||||||||||||||||||||
|
Sales
of goods and services
|
$
|
24,186
|
$
|
21,688
|
$
|
27,846
|
$
|
24,269
|
$
|
28,868
|
$
|
24,690
|
$
|
31,114
|
$
|
29,149
|
||||||||
|
Gross
profit from sales
|
6,280
|
5,660
|
7,302
|
6,537
|
6,930
|
6,357
|
8,229
|
7,757
|
||||||||||||||||
|
GECS
|
||||||||||||||||||||||||
|
Total
revenues
|
18,038
|
17,409
|
19,032
|
17,170
|
18,431
|
18,066
|
15,786
|
19,291
|
||||||||||||||||
|
Earnings
from continuing operations
|
2,456
|
3,407
|
2,774
|
2,416
|
2,010
|
3,219
|
534
|
3,375
|
||||||||||||||||
For GE,
gross profit from sales is sales of goods and services less costs of goods and
services sold.
Earnings-per-share
amounts are computed independently each quarter for earnings from continuing
operations, earnings (loss) from discontinued operations and net earnings. As a
result, the sum of each quarter’s per-share amount may not equal the total
per-share amount for the respective year; and the sum of per-share amounts from
continuing operations and discontinued operations may not equal the total
per-share amounts for net earnings for the respective quarters.
Item
9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
Not
applicable.
Item
9A. 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 December 31, 2008, and (ii) no change in
internal control over financial reporting occurred during the quarter ended
December 31, 2008, that has materially affected, or is reasonably likely to
materially affect, such internal control over financial reporting.
Management’s
annual report on internal control over financial reporting and the report of our
independent registered public accounting firm appears in Part II, Item 8.
“Financial Statements and Supplementary Data” of this Form 10-K
Report.
(141)
Item
9B. Other Information.
Not
applicable.
Part
III
Item
10. Directors, Executive Officers and Corporate
Governance.
Executive
Officers of the Registrant (As of February 1, 2009)
|
Name
|
|
Position
|
|
Age
|
|
Date
assumed
Executive
Officer
Position
|
|
Jeffrey
R. Immelt
|
Chairman
of the Board and Chief Executive Officer
|
52
|
January
1997
|
|||
|
Kathryn
A. Cassidy
|
Senior
Vice President and GE Treasurer
|
54
|
March
2003
|
|||
|
Pamela
Daley
|
Senior
Vice President, Corporate Business Development
|
56
|
July
2004
|
|||
|
Brackett
B. Denniston III
|
Senior
Vice President and General Counsel
|
61
|
February
2004
|
|||
|
John
Krenicki, Jr.
|
Vice
Chairman of General Electric Company; President & CEO, GE Energy
Infrastructure
|
46
|
July
2008
|
|||
|
John
F. Lynch
|
Senior
Vice President, Human Resources
|
56
|
January
2007
|
|||
|
Jamie
S. Miller
|
Vice
President, Controller and Chief Accounting Officer
|
40
|
April
2008
|
|||
|
Michael
A. Neal
|
Vice
Chairman of General Electric Company; Chairman, GE Capital Services,
Inc.
|
55
|
September
2002
|
|||
|
John
G. Rice
|
Vice
Chairman of General Electric Company; President & CEO, GE Technology
Infrastructure
|
52
|
September
1997
|
|||
|
Keith
S. Sherin
|
Vice
Chairman of General Electric Company and Chief Financial
Officer
|
50
|
January
1999
|
All
Executive Officers are elected by the Board of Directors for an initial term
which continues until the Board meeting immediately preceding the next annual
statutory meeting of shareowners, and thereafter are elected for one-year terms
or until their successors have been elected. All Executive Officers have been
executives of General Electric Company for the last five years except for Ms.
Miller. Prior to joining GE in April 2008, Ms. Miller served as the Senior Vice
President, Chief Accounting Officer and Controller of Wellpoint, Inc. Prior to
joining Wellpoint in August 2007, Ms. Miller served as a partner with
PricewaterhouseCoopers LLP. From May 2004 to August 2005, she was Vice
President, Corporate Controller and Chief Accounting Officer at Genworth
Financial (formerly GE Financial Assurance) having joined in 2003 as
Controller.
The
remaining information called for by this item is incorporated by reference to
“Election of Directors,” “Corporate Governance,” “Board of Directors and
Committees” and “Additional Information – Section 16(a) Beneficial Ownership
Reporting Compliance” in our definitive proxy statement for our 2009 Annual
Meeting of Shareowners to be held April 22, 2009, which will be filed within 120
days of the end of our fiscal year ended December 31, 2008 (the 2009 Proxy
Statement).
(142)
Item
11. Executive Compensation.
Incorporated
by reference to “Compensation Discussion and Analysis,” “Compensation Committee
Report,” “Summary Compensation Table,” “Grants of Plan-Based Awards,”
“Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock
Vested,” “Pension Benefits,” “Nonqualified Deferred Compensation,” “Potential
Payments Upon Termination” and “Non-management Directors’ Compensation” in the
2009 Proxy Statement.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Incorporated
by reference to “Information on Stock Ownership” in the 2009 Proxy
Statement.
The
remaining information called for by this item relating to “Securities Authorized
for Issuance under Equity Compensation Plans” is provided in Note 24 to the
consolidated financial statements in Part II, Item 8. “Financial Statements and
Supplementary Data” of this Form 10-K Report.
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
Incorporated
by reference to “Related Person Transactions” and “Corporate Governance” in the
2009 Proxy Statement.
Item
14. Principal Accounting Fees and Services.
Incorporated
by reference to “Independent Auditor” in the 2009 Proxy Statement.
Part
IV
Item
15. Exhibits, Financial Statement Schedules.
(a)1.
Financial Statements
Included
in Part II of this report:
|
|
Statement
of Earnings for the years ended December 31, 2008, 2007 and
2006
|
|
|
Consolidated
Statement of Changes in Shareowners’ Equity for the years ended December
31, 2008, 2007 and 2006
|
|
|
Statement
of Financial Position at December 31, 2008 and
2007
|
|
|
Statement
of Cash Flows for the years ended December 31, 2008, 2007 and
2006
|
|
|
Management’s
Annual Report on Internal Control Over Financial
Reporting
|
|
|
Report
of Independent Registered Public Accounting
Firm
|
|
|
Other
financial information:
|
|
|
Summary
of Operating Segments
|
|
|
Notes
to consolidated financial
statements
|
|
|
Operating
segment information
|
|
|
Geographic
segment information
|
|
|
Operations
by quarter (unaudited)
|
(a)2.
Financial Statement Schedules
The
schedules listed in Reg. 210.5-04 have been omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.
(a)3.
Exhibit Index
|
3(a)
|
The
Certificate of Incorporation, as amended, of General Electric Company
(Incorporated by reference to Exhibit 3(a) of General Electric’s Current
Report on Form 8-K dated October 20, 2008 (Commission file number
001-00035)).
|
|
|
3(ii)
|
The
By-Laws, as amended, of General Electric Company (Incorporated by
reference to Exhibit 3(ii) of General Electric’s Current Report on Form
8-K dated February 11, 2009 (Commission file number
001-00035)).
|
|
(143)
|
4(a)
|
Amended
and Restated General Electric Capital Corporation (GECC) Standard Global
Multiple Series Indenture Provisions dated as of February 27, 1997
(Incorporated by reference to Exhibit 4(a) to GECC’s Registration
Statement on Form S-3, File No. 333-59707 (Commission file number
1-6461)).
|
|
|
4(b)
|
Third
Amended and Restated Indenture dated as of February 27, 1997, between GECC
and The Bank of New York, as successor trustee (Incorporated by reference
to Exhibit 4(c) to GECC’s Registration Statement on Form S-3, File No.
333-59707 (Commission file number 1-6461)).
|
|
|
4(c)
|
First
Supplemental Indenture dated as of May 3, 1999, supplemental to Third
Amended and Restated Indenture dated as of February 27, 1997 (Incorporated
by reference to Exhibit 4(dd) to GECC’s Post-Effective Amendment No. 1 to
Registration Statement on Form S-3, File No. 333-76479 (Commission file
number 1-6461)).
|
|
|
4(d)
|
Second
Supplemental Indenture dated as of July 2, 2001, supplemental to Third
Amended and Restated Indenture dated as of February 27, 1997 (Incorporated
by reference to Exhibit 4 (f) to GECC’s Post-Effective Amendment No.1 to
Registration Statement on Form S-3, File No. 333-40880 (Commission file
number 1-6461)).
|
|
|
4(e)
|
Third
Supplemental Indenture dated as of November 22, 2002, supplemental to
Third Amended and Restated Indenture dated as of February 27, 1997
(Incorporated by reference to Exhibit 4(cc) to GECC’s Post-Effective
Amendment No. 1 to the Registration Statement on Form S-3, File No.
333-100527 (Commission file number 1-6461)).
|
|
|
4(f)
|
Fourth
Supplemental Indenture dated as of August 24, 2007, supplemental to Third
Amended and Restated Indenture dated as of February 27, 1997 (Incorporated
by reference to Exhibit 4(g) to GECC’s Registration Statement on Form S-3,
File number 333-156929 (Commission file number
1-6461)).
|
|
|
4(g)
|
Fourth
Supplemental Indenture dated as of December 2, 2008, supplemental to Third
Amended and Restated Indenture dated as of February 27, 1997 (Incorporated
by reference to Exhibit 4(h) to GECC’s Registration Statement on Form S-3,
File number 333-156929 (Commission file number
1-6461)).
|
|
|
4(h)
|
Senior
Note Indenture dated as of January 1, 2003, between General Electric and
The Bank of New York, as trustee for the senior debt securities
(Incorporated by reference to Exhibit 4(a) to General Electric’s Current
Report on Form 8-K filed on January 29, 2003 (Commission file number
001-00035)).
|
|
|
4(i)
|
Form
of Global Medium-Term Note, Series A, Fixed Rate Registered Note
(Incorporated by reference to Exhibit 4(r) to GECC’s Registration
Statement on Form S-3, File No. 333-156929 (Commission file number
1-6461)).
|
|
|
4(j)
|
Form
of Global Medium-Term Note, Series A, Floating Rate Registered Note
(Incorporated by reference to Exhibit 4(s) to the GECC’s Registration
Statement on Form S-3, File No. 333-156929 (Commission file number
1-6461)).
|
|
|
4(k)
|
Form
of LIBOR Floating Rate Note (Incorporated by reference to Exhibit 4 of
General Electric’s Current Report on Form 8-K dated October 29, 2003
(Commission file number 001-00035)).
|
|
|
4(l)
|
Eighth
Amended and Restated Fiscal and Paying Agency Agreement among GECC, GE
Capital Australia Funding Pty Ltd., GE Capital European Funding, GE
Capital Canada Funding Company, GE Capital UK Funding and The Bank of New
York, as fiscal and paying agent, dated as of May 12, 2006 (Incorporated
by reference to Exhibit 4(q) to GECC’s Registration Statement on Form S-3,
File No. 333-156929 (Commission file number 1-6461)).
|
|
|
4(m)
|
Indenture
dated December 1, 2005, between General Electric and The Bank of New York,
as successor trustee (Incorporated by reference to Exhibit 4(a) of General
Electric’s Current Report on Form 8-K filed on December 9, 2005
(Commission file number 001-00035)).
|
|
(144)
|
4(n)
|
Form
of 5.250% Note due 2017 (Incorporated by referenced to Exhibit 4(b) of
General Electric’s Current Report on Form 8-K filed on December 5, 2007
(Commission file number 001-00035)).
|
||
|
4(o)
|
Letter
from the Senior Vice President and Chief Financial Officer of General
Electric to GECC dated September 15, 2006, with respect to returning
dividends, distributions or other payments to GECC in certain
circumstances described in the Indenture for Subordinated Debentures dated
September 1, 2006, between GECC and the Bank of New York, as successor
trustee (Incorporated by reference to Exhibit 4(c) to GECC’s
Post-Effective Amendment No. 2 to Registration Statement on Form S-3,
File No. 333-132807).
|
||
|
4(p)
|
Form
of Warrants issued on October 16, 2008 (Incorporated by reference to
Exhibit 3(a) of General Electric’s Current Report on Form 8-K dated
October 20, 2008 (Commission file number
001-00035)).
|
||
|
4(q)
|
Agreement
to furnish to the Securities and Exchange Commission upon request a copy
of instruments defining the rights of holders of certain long-term debt of
the registrant and consolidated subsidiaries.*
|
||
|
(10)
|
All
of the following exhibits consist of Executive Compensation Plans or
Arrangements:
|
||
|
(a)
|
General
Electric Incentive Compensation Plan, as amended effective July 1, 1991
(Incorporated by reference to Exhibit 10(a) to General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 1991).
|
||
|
(b)
|
General
Electric Financial Planning Program, as amended through September 1993
(Incorporated by reference to Exhibit 10(h) to General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 1993).
|
||
|
(c)
|
General
Electric Supplemental Life Insurance Program, as amended February 8, 1991
(Incorporated by reference to Exhibit 10(i) to General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 1990).
|
||
|
(d)
|
General
Electric Directors’ Charitable Gift Plan, as amended through December 2002
(Incorporated by reference to Exhibit 10(i) to General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 2002).
|
||
|
(e)
|
General
Electric Leadership Life Insurance Program, effective January 1, 1994
(Incorporated by reference to Exhibit 10(r) to General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 1993).
|
||
|
(f)
|
General
Electric 1996 Stock Option Plan for Non-Employee Directors (Incorporated
by reference to Exhibit A to the General Electric Proxy Statement for its
Annual Meeting of Shareowners held on April 24, 1996 (Commission file
number 001-00035)).
|
||
|
(g)
|
General
Electric Supplementary Pension Plan, as amended effective January 1,
2009.*
|
||
|
(h)
|
General
Electric 2003 Non-Employee Director Compensation Plan, Amended and
Restated as of January 1, 2009.*
|
||
|
(i)
|
Amendment
to Nonqualified Deferred Compensation Plans, dated as of December 14, 2004
(Incorporated by reference to Exhibit 10(w) to the General Electric Annual
Report on Form 10-K (Commission file number 001-00035) for the fiscal year
ended December 31, 2004).
|
||
|
(j)
|
GE
Retirement for the Good of the Company Program, as amended effective
January 1, 2009.*
|
||
(145)
|
(k)
|
GE
Excess Benefits Plan, effective January 1, 2009.*
|
||
|
(l)
|
General
Electric 2006 Executive Deferred Salary Plan, as amended January 1,
2009.*
|
||
|
(m)
|
General
Electric Company 2007 Long-Term Incentive Plan (Incorporated by reference
to Exhibit 10.1 of General Electric’s Current Report on Form 8-K dated
April 27, 2007 (Commission file number 001-00035)).
|
||
|
(n)
|
Form
of Agreement for Stock Option Grants to Executive Officers under the
General Electric Company 2007 Long-term Incentive Plan, as amended January
1, 2009.*
|
||
|
(o)
|
Form
of Agreement for Annual Restricted Stock Unit Grants to Executive Officers
under the General Electric Company 2007 Long-term Incentive Plan, as
amended January 1, 2009.*
|
||
|
(p)
|
Form
of Agreement for Periodic Restricted Stock Unit Grants to Executive
Officers under the General Electric Company 2007 Long-term Incentive Plan
(Incorporated by reference to Exhibit 10.4 of General Electric’s Current
Report on Form 8-K dated April 27, 2007 (Commission file number
001-00035)).
|
||
|
(q)
|
Form
of Agreement for Long Term Performance Award Grants to Executive Officers
under the General Electric Company 2007 Long-term Incentive Plan
(Incorporated by reference to Exhibit 10.5 of General Electric’s Current
Report on Form 8-K dated April 27, 2007 (Commission file number
001-00035)).
|
||
|
(r)
|
Form
of Agreement for Performance Stock Unit Grants to Executive Officers under
the General Electric Company 2007 Long-term Incentive Plan (Incorporated
by reference to Exhibit 10.6 of General Electric’s Current Report on Form
8-K dated April 27, 2007 (Commission file
number 001-00035)).
|
||
|
(s)
|
Separation
Agreement and Release dated January 28, 2008, between General Electric and
David Nissen.*
|
||
|
(11)
|
Statement
re Computation of Per Share Earnings.**
|
||
|
12(a)
|
Computation
of Ratio of Earnings to Fixed Charges.*
|
||
|
12(b)
|
Computation
of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.*
|
||
|
(21)
|
Subsidiaries
of Registrant.*
|
||
|
(23)
|
Consent
of Independent Registered Public Accounting Firm.*
|
||
|
(24)
|
Power
of Attorney.*
|
||
|
31(a)
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as amended. *
|
||
|
31(b)
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as amended.*
|
||
|
(32)
|
Certification
Pursuant to 18 U.S.C. Section 1350.*
|
||
(146)
|
99(a)
|
Income
Maintenance Agreement, dated March 28, 1991, between the Registrant and
General Electric Capital Corporation (Incorporated by reference to Exhibit
99(h) to General Electric Capital Corporation’s Registration Statement on
Form S-3 (File No. 333-100527)).
|
|
|
99(b)
|
Eligible
Entity Designation Agreement among the Federal Deposit Insurance
Corporation, General Electric Capital Corporation and General Electric
Company.*
|
|
|
99(c)
|
Stock
Purchase Agreement, dated October 10, 2008, between General Electric
Company and Berkshire Hathaway Inc. (Incorporated by reference to Exhibit
3(a) of General Electric’s Current Report on Form 8-K dated October 20,
2008 (Commission file number 001-00035)).
|
|
|
99(d)
|
Form
of letter agreement between General Electric Company and each of Jeffrey
R. Immelt and Keith S. Sherin (Incorporated by reference to Exhibit 3(a)
of General Electric’s Current Report on Form 8-K dated October 20, 2008
(Commission file number 001-00035)).
|
|
|
99(e)
|
Undertaking
for Inclusion in Registration Statements on Form S-8 of General Electric
Company (Incorporated by reference to Exhibit 99(b) to General Electric
Annual Report on Form 10-K (Commission file number 001-00035) for the
fiscal year ended December 31, 1992).
|
|
|
*
|
Filed
electronically herewith.
|
|
|
**
|
Information
required to be presented in Exhibit 11 is provided in Note 8 to the
consolidated financial statements in Part II, Item 8. “Financial
Statements and Supplementary Data” of this Form 10-K Report in accordance
with the provisions of FASB Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings
per Share.
|
|
(147)
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this annual report on Form 10-K for the
fiscal year ended December 31, 2008, to be signed on its behalf by the
undersigned, and in the capacities indicated, thereunto duly authorized in the
Town of Fairfield and State of Connecticut on the 18th day of February
2009.
|
General
Electric Company
(Registrant)
|
|||
|
By
|
/s/
Keith S. Sherin
|
||
|
Keith
S. Sherin
Vice
Chairman and Chief Financial Officer
(Principal
Financial Officer)
|
(148)
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
Signer
|
Title
|
Date
|
|||
|
/s/
Keith S. Sherin
|
Principal
Financial Officer
|
February
18, 2009
|
|||
|
Keith
S. Sherin
Vice
Chairman and
Chief
Financial Officer
|
|||||
|
/s/
Jamie S. Miller
|
Principal
Accounting Officer
|
February
18, 2009
|
|||
|
Jamie
S. Miller
Vice
President and Controller
|
|||||
|
Jeffrey
R. Immelt*
|
Chairman
of the Board of Directors
(Principal
Executive Officer)
|
||||
|
James
I. Cash, Jr.*
|
Director
|
||||
|
William
M. Castell*
|
Director
|
||||
|
Ann
M. Fudge*
|
Director
|
||||
|
Claudio
X. Gonzalez*
|
Director
|
||||
|
Susan
Hockfield*
|
Director
|
||||
|
Andrea
Jung*
|
Director
|
||||
|
Alan
G. Lafley*
|
Director
|
||||
|
Robert
W. Lane*
|
Director
|
||||
|
Ralph
S. Larsen*
|
Director
|
||||
|
Rochelle
B. Lazarus*
|
Director
|
||||
|
James
J. Mulva*
|
Director
|
||||
|
Sam
Nunn*
|
Director
|
||||
|
Roger
S. Penske*
|
Director
|
||||
|
Robert
J. Swieringa*
|
Director
|
||||
|
Douglas
A. Warner III*
|
Director
|
||||
|
A
majority of the Board of Directors
|
|||||
|
*By
|
/s/
Michael R. McAlevey
|
||||
|
Michael
R. McAlevey
Attorney-in-fact
February
18, 2009
|
(149)