GE 2009 Annual Report Download

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2009 Annual Report

Table of contents

  • Page 1
    Reset Reimagine Reinvest Rethink Research Relationships Responsibility Renew 2009 Annual Report

  • Page 2
    ... to Investors 10 Business Overview 24 Board of Direutors 25 Finanuial Seution 120 Corporate Information 2009 Summary CONSOLIDATED REVENUES (In $ billions) 2005 2006 2007 172 152 136 2008 183 financial and strategic highlights 2009 157 Strong execution at GE Capital while keeping the Company safe...

  • Page 3
    ... banking svstem teetered on the abvss. The financial sector suffered losses that will exceed $3 trillion. Unemplovment surpassed 10% in the United States and rose even higher in manv parts of the world. Asset prices across kev segments plummeted. People lost faith in the principles of free markets...

  • Page 4
    ... investment by more than $50 billion and focused our resources on segments that continue to deliver high returns. We are managing the continued risk from commercial real estate and are well prepared for the potential for further volatility in this market. A number of our finance company competitors...

  • Page 5
    ... Model Simplified portfolio and key actions will create positive results investing in profitable growth financial services infrastructure technology creating market solutions to tough societal problems an energized and accountable team attractive growth in earnings, cash and returns GE 2009 ANNUAL...

  • Page 6
    ... leadership franchises in Energy, Oil & Gas, Healthcare, Aviation, Transportation, Water and Consumer Products. Investors value our infrastructure business model. We have grown our earnings by almost 10% annually for two decades with high returns and strong cash flow. We have great technical and...

  • Page 7
    ...16.6 Insurance Capital Finance Infrastructure Infrastructure Infrastructure Capital Finance Plastics, Media and Consumer & Industrial Reduce Risk & Investment Media and Consumer & Industrial Reposition, Simplify & Invest Consumer Growth & Value Creation (ongoing NBC Universal investment) GE 2009...

  • Page 8
    ... software and asset management. We are developing leadership in new markets like smart grid, electronic medical records, movement planning for locomotives, advanced aviation information systems and productivity solutions. We lead in groWth marKets. We have continued to drive two infrastructure...

  • Page 9
    ... a full pipeline of new products. And product services, which account for more than 70% of our infrastructure profitability, will continue to grow. By 2011, we should see earnings growth from both equipment and services. AVERAGE P/E RATIO 1979 1989 1999 39 2009 14 9 9 GE 2009 ANNUAL REPORT 7

  • Page 10
    ...restore the GE Capital dividend in the future. We plan to allocate capital for acquisitions to build out our strong infrastructure franchise and grow our dividend in line with earnings. Over time, we may buy back stock. We will be disciplined, patient and committed to improving long-term returns. We...

  • Page 11
    ...services, investments in emerging markets and valuable relationships. Onlv an organization with such a unique identitv - at once, a problem solver, builder, educator and learner - can achieve such a task. Jeffrey r. immelt Chairman of the Board and Chief Executive Officer February 19, 2010 ge 2009...

  • Page 12
    ... technical leadership. We are now creating local technologies in emerging markets and then distributing them globally, a new way of developing products called "reverse innovation." and we're making new investments - even amid the recession, ge increased spending on company-funded r&d in 2009. the ge...

  • Page 13
    .... That's why GE invested in the Brivo line of MRI systems, digital X-rays and CT scanners. Created through reverse innovation, these products deliver simplified, highly capable systems to meet the needs of clinics that otherwise might not have the resources to access them. GE 2009 ANNUAL REPORT 11

  • Page 14
    ...systems-based service solutions that improve customer productivity and efficiency. helping our customers do business better makes good business sense for ge. smart grid Our smart grid technologies marry information technology and automation with current electrical infrastructure, helping support the...

  • Page 15
    ... the cost of care. GE is helping hospital systems like Ochsner and Virtua Health develop and execute strategies that align their organizations; streamline processes; upgrade technical capabilities; and optimize flow, resources and space. With innovative GE technologies and services, hospitals have...

  • Page 16
    ...oil & gas business, meeting rising demand and maintaining energy security means opening up new production frontiers with reliable technology that minimizes risk, drives production efficiency and helps address environmental sustainability. over the next three years, ge oil & gas will invest more than...

  • Page 17
    ...engine could power more than 2,000 C919s over the next 20 years. Separately, GE Aviation is working with another company, AVIC, to form a Chinabased joint venture that will build and sell integrated avionics systems for global commercial aircraft. avionics engine testing GE 2009 ANNUAL REPORT 15

  • Page 18
    ... to build on the most advanced open architecture avionics in the world for the commercial aviation industry. Together we will create a competitive company with a global strategy to benefit China and the United States." Lin Zuoming, President Aviation Industry Corporation of China 16 GE 2009 ANNUAL...

  • Page 19
    ...center that brings jobs and economic diversity to Michigan. Together, we are investing now to create tomorrow's leading positions in information technology, clean energy and transportation." Governor Jennifer M. Granholm State of Michigan "By having a partner like GE Capital in our business, we can...

  • Page 20
    ... ecomagination products 2. double investment in r&d increase r&d to 80+ products grow at $10b 2x ge revenue 2010 -15 17 products 2005 2009 2010 2015 3. reduce greenhouse gas emissions and improve energy efficiency of ge 4. reduce water use and improve water reuse 5. Keep the public informed...

  • Page 21
    ..., miniature devices to broaden use across more geographies; remote, home monitoring to reduce costs and improve patient care; and tools to help our hospital customers improve efficiency. Our goal is to help people around the world lead healthier, more productive lives. GE 2009 ANNUAL REPORT 19

  • Page 22
    ... programs, equipment leasing and other services to support businesses and jobs around the world. More than 1.2 million small and medium-sized businesses in the United States rely on GE Capital for their financing needs. In 2009 alone, GE Capital provided more than $150 billion in global lending...

  • Page 23
    ... credit line and servicing private-label credit cards. Needing help of a different kind, Tourneau once again turned to GE Capital, this time as part of Access GE - a unique program that works with customers on their most pressing business issues. Using our resources and expertise, GE executives...

  • Page 24
    ... success and adversity, and we seek lessons in leadership from both the outside and the inside. in 2009, ge partnered with diverse institutions from around the world, including the u.s. military academy, to share ideas and perspectives about developing next-generation leaders who will thrive in the...

  • Page 25
    ... the Board is confident that GE has the right executive compensation systems in place to foster the management performance that is central to creating long-term shareowner value. Sincerely, ralph s. larsen Chairman, Management Development and Compensation Committee February 19, 2010 GE 2009 ANNUAL...

  • Page 26
    ... Board and Chief Executive Officer, General Electric Company. Director since 2000. (pictured on page 1) 1 audit committee 2 management development and compensation committee 3 nominating and corporate governance committee 4 public responsibilities committee 5 presiding director 24 GE 2009 ANNUAL...

  • Page 27
    ...to investors. Management's Annual Report on Internal Control Over Financial Reporting ...In this report our Chief Executive and Financial Officers provide their assessment of the effectiveness of our internal control over financial reporting. Report of Independent Registered Public Accounting Firm...

  • Page 28
    ... and investor meetings annually. We welcome the strong oversight of our financial reporting activities by our independent registered public accounting firm, KPMG LLP, engaged by and reporting directly to the Audit Committee. U.S. legislation requires management to report on internal control over...

  • Page 29
    ... 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...

  • Page 30
    ... Infrastructure segment. The Security business of Enterprise Solutions will be reported in Corporate Items and Eliminations pending its expected sale. Also, effective January 1, 2010, the Capital Finance segment was renamed GE Capital and includes all of the continuing operations of General Electric...

  • Page 31
    ... to manage through the current challenging credit environment and continue to reposition General Electric Capital Corporation (GE Capital) as a diversely funded and smaller, more focused finance company with strong positions in several midmarket, corporate and consumer financing segments. Consumer...

  • Page 32
    ...by benefit payments. 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. On an Employee Retirement Income Security Act (ERISA) basis, the GE Pension Plan remains fully funded at January 1, 2010. We will...

  • Page 33
    ... Audit Committee receives a risk update, which focuses on the principal risks affecting GE as well as reporting on the company's risk assessment and risk management guidelines, policies and processes; and the Audit Committee annually conducts an assessment of compliance issues and programs. GE 2009...

  • Page 34
    ... of long-term strategic and operational planning; executive development and evaluation; regulatory and litigation compliance; health, safety and environmental compliance; financial reporting and controllership; and information technology and security. In August 2009, GE appointed a Chief Risk Of...

  • Page 35
    ... GE Audit Committee. At these meetings, which will occur at least four times a year, GE Capital senior management will focus on the risk strategy and financial services portfolio, including the risk oversight processes used to manage all the elements of risk managed by the ERMC. GE Capital's risk...

  • Page 36
    ... Segments General Electric Company and consolidated affiliates (In millions) 2009 2008 2007 2006 2005 REvENuES Energy Infrastructure Technology Infrastructure NBC Universal Capital Finance Consumer & Industrial Total segment revenues Corporate items and eliminations CONSOLIDATED REvENuES SEGMENT...

  • Page 37
    ..., for product services orders. See Corporate Items and Eliminations for a discussion of items not allocated to this segment. NbC uNIvERSAL revenues decreased 9%, or $1.5 billion, in 2009 as lower revenues in our broadcast television business ($1.1 billion), reï¬,ecting the lack of a current-year...

  • Page 38
    ...-taxed earnings from global operations ($0.7 billion) and Genpact mark-to-market gains ($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 2009 revenues decreased...

  • Page 39
    ... 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. Energy Financial Services 2009 revenues decreased...

  • Page 40
    ... at NBC Universal and $0.1 billion at Technology Infrastructure and net losses on business exits of $0.2 billion at Capital Finance. GECS amounts are on an after-tax basis. Corporate Items and Eliminations include the elimination of transactions between our segments. In 2007, revenues, eliminations...

  • Page 41
    ... effects of the weaker U.S. dollar, primarily at Consumer 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...

  • Page 42
    ... of cash into short-term investments such as money market funds and certificates of deposits, and an increase in our retained interests in securitization entities. Of the amount at December 31, 2009, we held debt securities with an estimated fair value of $41.7 billion, which included corporate...

  • Page 43
    ... 9, 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 $3.7 billion at year-end 2009, which represents the lower of carrying amount or estimated fair value less costs to sell...

  • Page 44
    ... economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. Our risk management process includes standards and policies...

  • Page 45
    ... revolving credit Non-U�S� auto Other REAL ESTATE ENERGY FINANCIAL SERvICES GECAS OTHER TOTAL (a) During the first quarter of 2009, we transferred Artesia from CLL to Consumer� Prior-period amounts were reclassified to conform to the current-period's presentation� GE 2009 ANNUAL REPORT 43

  • Page 46
    ...loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loan-tovalue ratios. We classify Real Estate loans as impaired when the most recent valuation reï¬,ects a projected loan-to-value ratio at maturity in excess of 100%, even if the loan is currently...

  • Page 47
    ... economic environment continues to pressure underlying property values. At December 31, 2009, real estate held for investment included $0.8 billion representing 82 foreclosed commercial real estate properties. DELINquENCY RATES on managed equipment financing loans and leases and managed consumer...

  • Page 48
    ... rising unemployment, a slowdown in general business activity and continued challenging conditions in the credit markets. We expect these markets will continue to be affected while the economic environment remains challenging. We review the estimated values of our commercial real estate investments...

  • Page 49
    ...these notes were eligible for investors to use as collateral under the Federal Reserve Bank of New York's Term Asset-Backed Securities Loan Facility (TALF). We manage our liquidity to help ensure access to sufficient funding at acceptable costs to meet our business needs and financial obligations...

  • Page 50
    ... in the yield curve. • Controlling new originations in GE Capital to reduce capital and funding requirements • Using part of our available cash balance • Pursuing alternative funding sources, including bank deposits and asset-backed fundings • Using our bank credit lines which, with...

  • Page 51
    ...-to-capital, retained cash ï¬,ow to debt, market access, back-up liquidity from banks and other sources, composition of total debt and interest coverage • One group of consolidated entities holds investment securities funded by the issuance of GICs. If the long-term credit rating of GE Capital...

  • Page 52
    ... the Income Maintenance Agreement will not affect the ratio of earnings to fixed charges as determined in accordance with current SEC rules because it does not constitute an addition to pre-tax income under current U.S. GAAP. Consolidated Statement of Changes in Shareowners' Equity GE shareowners...

  • Page 53
    ...nancial 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...

  • Page 54
    ... agreements, 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...

  • Page 55
    ...to have no value� QSPEs that we use for securitization are funded with assetbacked commercial paper and term debt� The assets we securitize include: receivables secured by equipment, commercial real estate, credit card receivables, inventory ï¬,oorplan receivables, GE trade receivables and other...

  • Page 56
    ... 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 ï¬,uctuations in market values...

  • Page 57
    ..., we used cash ï¬,ows that reï¬,ected management's forecasts and discount rates that reï¬,ect the risks associated with the current market. Based on the results of our testing, the fair values at each of the GE Industrial reporting units and the CLL, Consumer, Energy Financial Services and GECAS...

  • Page 58
    ... 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...

  • Page 59
    ...to reï¬,ect the risks specific to our asset being valued. Further information on fair value measurements is provided in Notes 1, 21 and 22. OTHER LOSS CONTINGENCIES are recorded as liabilities when it is value every reporting period include investments in debt and equity securities and derivatives...

  • Page 60
    ... 2010. In addition to the former QSPEs described above, we will consolidate assets of VIEs related to direct investments in entities that hold loans and fixed income securities, a media joint venture and a small number of companies to which we have extended loans in the ordinary course of business...

  • Page 61
    ... - basic Dividends declared Stock price range Year-end closing stock price Cash and equivalents Total assets of continuing operations Total assets Long-term borrowings Common shares outstanding - average (in thousands) Common shareowner accounts - average Employees at year end United States Other...

  • Page 62
    Statement of Earnings For the years ended December 31 (In millions; per-share amounts in dollars) General Electric Company and consolidated affiliates 2009 2008 2007 REvENuES Sales of goods Sales of services Other income (Note 17) GECS earnings from continuing operations GECS revenues from ...

  • Page 63
    ... Capital Services, Inc. and all of its affiliates and associated companies. Separate information is shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page. GE 2009 ANNUAL REPORT...

  • Page 64
    ... accrued Dividends payable Other GE current liabilities Bank deposits (Note 10) Long-term borrowings (Note 10) Investment contracts, insurance liabilities and insurance annuity benefits (Note 11) All other liabilities (Note 13) Deferred income taxes (Note 14) Liabilities of businesses held for sale...

  • Page 65
    ... Capital Services, Inc. and all of its affiliates and associated companies. Separate information is shown for "GE" and "GECS." Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page. GE 2009 ANNUAL REPORT...

  • Page 66
    ... longer than 90 days) Proceeds from issuance of preferred stock and warrants Proceeds from issuance of common stock Net dispositions (purchases) of GE shares for treasury Dividends paid to shareowners Capital contribution from GE to GECS All other financing activities Cash from (used for) financing...

  • Page 67
    ...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 "GECS." Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated...

  • Page 68
    ... 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...

  • Page 69
    ... 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...

  • Page 70
    ...relevant markets to assess recovery alternatives - for example, for real estate loans, relevant markets are local; for commercial aircraft loans, relevant markets are global. We provide allowances based on our evaluation of all available information, including expected future cash ï¬,ows, fair value...

  • Page 71
    ... 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 certain other equity securities, at fair value. See Note 21 for further information on fair...

  • Page 72
    ... fair value of investment securities, and they are included in Level 1. Level 1 securities primarily include publicly-traded equity securities. When quoted market prices are unobservable, we obtain pricing information from an independent pricing vendor. The pricing vendor uses various pricing models...

  • Page 73
    ...at the measurement date. Investments in collective funds are included in Level 2. LONG-LIvED ASSETS, including aircraft and real estate, are valued using the best information available, including quoted market prices or market prices for similar assets when available or internal cash ï¬,ow estimates...

  • Page 74
    ... and Energy Infrastructure segments enter into collaborative arrangements with manufacturers and suppliers of components used to build and maintain certain engines, aeroderivatives, and turbines, under which GE and these participants share in risks and rewards of these product programs. Adoption of...

  • Page 75
    ... are accounts payable ($398 million), other current liabilities ($4,051 million) and all other liabilities ($1,300 million). On November 12, 2009, we committed to sell our Security business (within Enterprise Solutions), and expect to complete this sale in early 2010. Assets and liabilities...

  • Page 76
    ... payable and pension liabilities related to the sale of our Plastics business in 2007. Summarized financial information for discontinued GECS operations is shown below. (In millions) 2009 2008 2007 OPERATIONS Total revenues Loss from discontinued operations before income taxes Income tax benefit...

  • Page 77
    ... December 31, 2008, primarily driven by decreases in unrealized losses due to market improvements, investment of cash into short-term investments such as money market funds and certificates of deposits, and an increase in our retained interests in securitization entities. GE 2009 ANNUAL REPORT 75

  • Page 78
    ...310 million, respectively, relate to residential subprime credit, primarily supporting our guaranteed investment contracts. These are collateralized primarily by pools of individual, direct mortgage loans (a majority of which were originated in 2006 and 2005), not other structured products such as...

  • Page 79
    ... certain obligations. Supplemental information about gross realized gains and losses on available-for-sale investment securities follows. (In millions) 2009 2008 2007 Energy Infrastructure $ 6,695 Technology Infrastructure 7,750 - NBC Universal (b) Consumer & Industrial 1,066 Corporate items and...

  • Page 80
    ... 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...

  • Page 81
    ... 31, 2009 primarily relating to increases at Real Estate ($5,678 million) and CLL ($2,697 million). We regularly review our Real Estate loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loanto-value ratios. We classify Real Estate loans as...

  • Page 82
    ... Other REAL ESTATE ENERGY FINANCIAL SERvICES GECAS OTHER Total 69 900 295 283 69 1 - - - $1,731 (a) Other primarily included the effects of securitization activity, currency exchange, dispositions and acquisitions. (b) During the first quarter of 2009, we transferred Artesia from CLL to Consumer...

  • Page 83
    ...Due in 2010 2011 2012 2013 2014 2015 and later Total $ 7,812 6,110 4,724 3,729 3,046 8,820 $ 34,241 Land and improvements, buildings, structures and related equipment Equipment leased to others Aircraft Vehicles (d) Railroad rolling stock Construction and manufacturing Mobile equipment All other...

  • Page 84
    ..., we used cash ï¬,ows that reï¬,ected management's forecasts and discount rates that reï¬,ect the risks associated with the current market. Based on the results of our testing, the fair values at each of the GE Industrial reporting units and the CLL, Consumer, Energy Financial Services and GECAS...

  • Page 85
    ...2008, respectively. We estimate annual pre-tax amortization for intangible assets subject to amortization over the next five calendar years to be as follows: 2010 - $1,725 million; 2011 - $1,442 million; 2012 - $1,229 million; 2013 - $1,036 million; 2014 - $1,044 million. GE 2009 ANNUAL REPORT 83

  • Page 86
    ... of related fair value interest rate and currency hedges, if any, directly associated with the original debt issuance. (b) General Electric Capital Corporation (GE Capital) had issued and outstanding $59,336 million (long-term borrowings) and $35,243 million ($21,823 million commercial paper and...

  • Page 87
    ...service and earnings. PENSION PLAN PARTICIPANTS December 31, 2009 Total Principal pension plans Other pension plans (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 2009 and 2008. Active employees...

  • Page 88
    ...fit 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. For the principal pension plans, we apply our expected rate of return to a market-related value of assets...

  • Page 89
    ... 10% of the fair value of trust assets at the time of purchase. GE securities represented 3.3% and 3.5% of trust assets at year-end 2009 and 2008, respectively. The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities, real estate and hedge...

  • Page 90
    ...million for other pension plans. ESTIMATED FuTuRE bENEFIT PAYMENTS (In millions) 2010 2011 2012 2013 2014 2015- 2019 Funded status (a) $ (6,020) $ (4,438) $(2,678) $(2,374) Pension asset (liability) recorded in the Statement of Financial Position Pension asset $ - Pension liabilities (133) Due...

  • Page 91
    ... contribute approximately $710 million in 2010 to fund such benefits. We fund retiree life insurance benefits at our discretion. ASSET ALLOCATION December 31 2009 Target allocation Equity securities Debt securities (including cash equivalents) Private equities Real estate Other 37-77% (a) 11-41...

  • Page 92
    ... 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...

  • Page 93
    ...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. GE 2009 ANNUAL...

  • Page 94
    ... have been reinvested in active non-U.S. business operations and we do not intend to repatriate these earnings to fund 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...

  • Page 95
    ...RATE Consolidated 2009 2008 2007 2009 GE 2008 2007 2009 GECS 2008 2007 U�S� federal statutory income tax rate Increase (reduction) in rate resulting from Inclusion of after-tax earnings of GECS in before-tax earnings of GE Tax on global activities including exports (a) (b) U.S. business credits...

  • Page 96
    ... amendments to ASC 740, Income Taxes. See Note 1 for further information. (f) Included $300 million and $75 million of dividends on preferred stock in 2009 and 2008, respectively. (g) Related to accretion of redeemable securities to their redemption value. (h) On January 1, 2009, we adopted an...

  • Page 97
    ... NBC Universal Others (a) Preferred stock (b) GE Capital affiliates Total $4,937 2,631 277 $7,845 $ 5,091 3,579 277 $ 8,947 (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...

  • Page 98
    ...compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of two years, of which approximately $191 million, pre tax, is expected to be recognized in 2010. 96 GE 2009 ANNUAL REPORT The fair value of each restricted stock unit is the market...

  • Page 99
    ... $495 498 $416 436 $334 288 $278 211 Interest on loans Equipment leased to others Fees Investment income (a) Financing leases Premiums earned by insurance activities Net securitization gains Real estate investments Associated companies Other items (b) (c) Total $20,080 12,231 4,634 3,391 3,322...

  • Page 100
    ... or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. It also establishes a three-level valuation hierarchy based upon observable and non-observable inputs. 98 GE 2009 ANNUAL...

  • Page 101
    ... adjustment was a gain of $9 million and $177 million, respectively. (d) Included private equity investments and loans designated under the fair value option. (e) Primarily represented the liability associated with certain of our deferred incentive compensation plans. GE 2009 ANNUAL REPORT 99

  • Page 102
    ... Transfers in and/or out of Level 3 (b) December 31, 2009 Investment securities Debt U.S. corporate State and municipal Residential mortgage-backed Commercial mortgage-backed Asset-backed Corporate - non-U.S. Government - non-U.S. U.S. government and federal agency Retained interests Equity...

  • Page 103
    ... 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. 2009 Assets...

  • Page 104
    ... using current market interest rate data adjusted for inherent credit risk and/or quoted market prices. Assets and liabilities that are reï¬,ected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment...

  • Page 105
    ... December 31, 2009 (In millions) Financial statement caption CASH FLOW HEDGES Interest rate contracts Currency exchange contracts $ (854) 2,579 Commodity contracts Total (5) $ 1,720 Gain (loss) recognized in CTA Interest and other financial charges GECS revenues from services Interest and...

  • Page 106
    ... in interest rates, currency exchange rates, commodity prices and other risks. Gains or losses related to the derivative are recorded in predefined captions in the Statement of Earnings, typically "GECS revenues from services" or "Other income," based on our accounting policy. In general, the...

  • Page 107
    ... as alternative 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...

  • Page 108
    ... must first be used to pay down outstanding commercial paper and interest thereon as well as other expenses of the entity. Excess cash ï¬,ows 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...

  • Page 109
    ...of credit card receivables to the GE Capital Credit Card Master Note Trust in exchange for additional subordinated interests. These actions had the effect of maintaining the AAA ratings of certain securities issued by these entities. (d) Uncertificated seller's interests. GE 2009 ANNUAL REPORT 107

  • Page 110
    ... 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, 2009 and 2008 follow. (Dollars in millions) Equipment Commercial real estate Credit card receivables Other assets Activity related to...

  • Page 111
    ... 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 $43 million for December 31, 2009. GE 2009 ANNUAL REPORT 109

  • Page 112
    ... supplemental information related to GE and GECS cash ï¬,ows is shown below. December 31 (In millions) 2009 2008 2007 GE NET DISPOSITIONS (PuRCHASES) OF GE SHARES FOR TREASuRY Open market purchases under share repurchase program Other purchases Dispositions GECS ALL OTHER OPERATING ACTIvITIES...

  • Page 113
    ... 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 GE 2009 ANNUAL REPORT...

  • Page 114
    ... loans; deposits and other savings products; and small and medium enterprise lending on a global basis. Real Estate offers a comprehensive range of capital and investment solutions and finances, with both equity and loan structures, the acquisition, refinancing and renovation of office buildings...

  • Page 115
    ... to segment pre-tax income of Energy Infrastructure, Technology Infrastructure, NBC Universal, Capital Finance and Consumer & Industrial operating segments, respectively, for the year ended December 31, 2009. Aggregate summarized financial information for significant associated companies assuming...

  • Page 116
    ... 111 $31,114 8,229 15,786 534 Total revenues Earnings from continuing operations attributable to the Company 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...

  • Page 117
    ... information about the amounts of dividends paid by our financial services business and the separate presentation in our financial statements of the Financial Services (GECS) cash ï¬,ows. We believe that our measure of Industrial CFOA provides management and investors with a useful measure...

  • Page 118
    ... for our Capital Finance segment. GE Pre-Tax Earnings from Continuing Operations, Excluding GECS Earnings and the Corresponding Effective Tax Rates (Dollars in millions) 2009 2008 2007 We have provided the GE Capital ratio of debt to equity on a basis that reï¬,ects the use of cash and equivalents...

  • Page 119
    ... 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...

  • Page 120
    ... 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...

  • Page 121
    ..., not the obligation, to execute a transaction at a designated price, generally involving equity interests, interest rates, currencies or commodities. See "Hedge." PRODuCT SERvICES For purposes of the financial statement RETuRN ON AvERAGE TOTAL CAPITAL INvESTED For GE, earnings from continuing...

  • Page 122
    ... 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...

  • Page 123
    ...our interactive online annual report at www.ge.com/annualreport Thanks to the customers, partners and GE employees who appear in this annual report for contributing their time and support. The paper used in this report was supplied by participants of the Sustainable Initiative Programs. The majority...

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