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2011 Annual Report
GE Works

Table of contents

  • Page 1
    GE Works 2011 Annual Report

  • Page 2
    CONTENTS 2 Letter to Shareowners 10 Business Overview 29 Board of Directors 31 Financial Section 142 Corporate Information 2011 SUMMARY CONSOLIDATED REVENUES (In $ billions) 2007 170 NBCU 155 2008 180 154 163 139 GE ex NBCU 133 150 2009 2010 financial and strategic highlights 2011 147 142 22%...

  • Page 3
    ... Infrastructure Keith S. Sherin Vice Chairman, GE and Chief Financial Officer Michael A. Neal Vice Chairman, GE and Chairman & Chief Executive Officer, GE Capital Corp. John G. Rice Vice Chairman, GE and President & Chief Executive Officer, Global Growth & Operations GE 2011 ANNUAL REPORT 1

  • Page 4
    ... world can, but that everyone needs. This is a source of pride. To our employees and customers, it defines GE. We build on this mission with a belief in a better way. We are constantly learning and driving best practices. We invest to train our people and develop leaders. We learn from customers...

  • Page 5
    ...is how we compete and win. GE Works. A POSITION OF STRENGTH GE's Operating EPS growth was 22% last year. We bought back preferred shares of stock we issued during the financial crisis and increased our dividend twice. Our stock price finished about ï¬,at, in line with the broader S&P 500 Index. We...

  • Page 6
    ...creates volatility as markets rise and fall. Today, we have a broad Energy portfolio, including a range of gas power generation products, oil and gas technology, renewables, smart grid services, energy management technologies and controls; these products and services are sold around the world. As an...

  • Page 7
    ... winning in the marketplace. The one area that we cannot control is external "headline risk." The financial services industry is still going GE CAPITAL TRANSFORMATION Pre-Crisis TIER ONE COMMON RATIO LEVERAGE CP COVERAGE DEBT RATING 4% 8:1 2011 10% 4:1 74% 292% AAA AA GE 2011 ANNUAL REPORT 5

  • Page 8
    ... to localize capability, better serve our customers and help the government address healthcare needs for its citizens. We are playing to win in every corner of the world. The best global companies are developing new business models tailored for growth markets. For instance, in the next 25 years...

  • Page 9
    ... the portfolio. Last year we helped launch a center at The Ohio State University that is dedicated to the middle market, the segment that consists of companies ranging in revenues from $10 million to $1 billion, including almost 200,000 businesses in the U.S. We have great origination capability...

  • Page 10
    ... way, utilizing ideas from thousands of employees and targeting $2 billion of margin improvements. Our team is using classic GE tools like lean, work out and Six Sigma. Projects have big payoffs. In our Oil & Gas business, our goal is to give customers a new business quote in a day, have a project...

  • Page 11
    ...of GE Works. 2012: FOCUS FOR INVESTORS 1 INDUSTRIAL GROWS 10%+ AND RETURN CASH FROM GE CAPITAL 2 BUILD SOFTWARE AND ANALYTICS CAPABILITY 3 INVEST IN GLOBAL GROWTH AND BUILD SUSTAINABLE PROCESSES 4 BEST-INCLASS OPERATING PERFORMANCE: GROW MARGINS 5 CAPITAL ALLOCATION: ATTRACTIVE DIVIDEND tions...

  • Page 12
    GE Model C30ACi Locomotive Assembly Transnet Freight Rail Pretoria, South Africa

  • Page 13
    GE works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works. GE 2011 ANNUAL REPORT 11

  • Page 14
    ...GE Capital provided billions in financing so businesses could build and grow their operations and consumers could build their financial futures. We build appliances, lighting, power systems and other products that help millions of homes, offices, factories and retail facilities around the world work...

  • Page 15
    DING Left to right: Travis Saylor Final Assembly Operator GE GeoSpringâ„¢ Hybrid Water Heater Assembly GE Appliances Louisville, Kentucky Randy Barger Replacement Operator Kevin Moore Final Assembly Operator

  • Page 16
    ...'s Foods updated and expanded operations, added 359 new jobs and grew revenue to $405 million in 2011. GE works for customers-helping them build businesses, and build them better. Photo above and right: Shearer's Foods, Millennium Manufacturing Facility, Massillon, Ohio 14 GE 2011 ANNUAL REPORT

  • Page 17
    ... fuelefficient replacement. The deployment of the new vehicles will help ADT save more than $6 million a year and reduce CO2 emissions 40%. This year, GE Capital will launch the Access GE online portal, a new way to deliver crucial knowledge and expertise to our customers. GE 2011 ANNUAL REPORT 15

  • Page 18
    Stephen Fitzgibbon Mechanical Fitter I Gorgon Tree Subsea Control Systems GE Oil & Gas Aberdeen, Scotland

  • Page 19
    ... the world needs: from an integrated wind, solar and natural gas project, to smart grids that help utilities manage electricity demand, to gas engines that run on organic waste, to more accessible charging stations for electric vehicles. We don't just imagine a cleaner and more productive world. We...

  • Page 20
    ... technology and service solutions for the sector. Innovations in recent years have included next-generation valves with improved nanocoatings for increased safety and reliability; pipe inspection technology; and other advances that enable oil and gas companies to produce the energy the world needs...

  • Page 21
    ... power generation day or night. The FlexAero is the world's most efficient combined-cycle gas turbine in its class and will save 26 million gallons of water annually with its innovative eco-friendly technology. The first FlexEfficiency 50 plant will go online in 2015. GE 2011 ANNUAL REPORT 19

  • Page 22
    ... cost-effective, with lower carbon emissions, too. We make the world's largest jet engine-and among the world's most efficient. We build locomotives that reduce emissions. And we provide advanced air traffic and rail freight management systems. We don't just dream of a world where people and goods...

  • Page 23
    GE90 Aircraft Engine Testing GE Aviation Peebles, Ohio

  • Page 24
    ... quality and delivery through a team-based culture and lean manufacturing techniques. We do all this so we can deliver a record number of aircraft engine orders with maximum cost-efficiency, productivity and quality. Photo: GE Aviation's Evendale, Ohio, world headquarters 22 GE 2011 ANNUAL REPORT

  • Page 25
    ...FOR EXPANSION Transnet Freight Rail (TFR), one of South Africa's largest rail freight operators, is striving to meet the growing needs of a rapidly developing region. The GE locomotive is delivering the solution. Three of our locomotives can do the work of four older models, with lower costs, better...

  • Page 26

  • Page 27
    ...caregivers save nearly 3,000 lives every day and address the world's biggest healthcare challenges. GE is at work providing advanced diagnostic tools as well as systems that help researchers discover lifesaving solutions, and patient record systems that help lower costs and enhance patient care. Our...

  • Page 28
    ... image reconstruction technology uses modeling and complex data analysis to enhance clinical images even at lowered doses. GE not only makes tools to help doctors, we also provide entire healthcare systems with services and technology to meet the needs of their patients. 26 GE 2011 ANNUAL REPORT

  • Page 29
    ...diagnostics to enable patient-specific cancer therapies. We're also bringing new weapons to the fight against breast cancer by increasing access to mammography screenings in underserved areas, like Wyoming, Saudi Arabia and China. Photo left and above: Riyadh, Saudi Arabia GE 2011 ANNUAL REPORT 27

  • Page 30
    ... technologies, developing advanced manufacturing skills, applying intelligent software to make things work smarter, and partnering with customers and communities around the globe. GE works by delivering economic growth, shareholder value and, most of all, solutions that make the world work better.

  • Page 31
    ...General Electric Company, Fairfield, Connecticut. 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 Risk Committee 6 Presiding Director GE 2011 ANNUAL...

  • Page 32
    TO OUR SHAREOWNERS As Presiding Director and Chair of the Management Development and Compensation Committee of GE's Board of Directors, I write each year to share our perspective on how GE measures performance, how we motivate and reward our executives, and how we work to align both performance ...

  • Page 33
    ... provide information about our stock performance over the last five years. 140 Glossary ...For your convenience, we also provide a Glossary of key terms used in our financial statements. We also present our financial information electronically at www.ge.com/investor. GE 2011 ANNUAL REPORT 31

  • Page 34
    ... Board of Directors oversees management's business conduct, and our Audit Committee, which consists entirely of independent directors, oversees our internal control over financial reporting. We continually examine our governance practices in an effort to enhance investor trust and improve the Board...

  • Page 35
    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, 2011 and 2010, and the ...

  • Page 36
    ... costs. We continue to invest in market-leading technology and services at Energy and Oil & Gas. Aviation (12% and 20% of consolidated three-year revenues and total segment profit, respectively) revenues and segment profit increased 7% and 6%, respectively, in 2011 and fell 6% 34 GE 2011 ANNUAL...

  • Page 37
    ... of long-term product service costs in our maintenance service agreements. Home & Business Solutions (6% and 2% of consolidated three-year revenues and total segment profit, respectively) revenues have decreased 2% in 2011 and increased 2% in 2010. Home & Business Solutions revenues trended down...

  • Page 38
    ... with 2010, and operating profit from product services was $11.8 billion in 2011, an increase of 15% compared with 2010. Both the sales and operating profit of product services increases were at Energy Infrastructure, Aviation, Transportation and Healthcare. POSTRETIREMENT BENEFIT PLANS costs were...

  • Page 39
    ... statutory tax rate is reported in the effective tax rate reconciliation in the line "Tax on global earnings including exports." The increase in the consolidated effective tax rate from 2010 to 2011 was due in significant part to the high effective tax rate on the pre-tax gain on the NBC Universal...

  • Page 40
    ...Note 14. Audit resolutions-effect on GE tax rate, excluding GECS earnings 2011 2010 2009 Tax on global activities including exports U.S. business credits All other-net (0.9)% (0.4) (0.7) (2.0)% (3.3)% (0.5) (0.8) (4.6)% (0.4)% - (0.2) (0.6)% The GE effective tax rate increased from 2010 to 2011...

  • Page 41
    ... an assessment of compliance issues and programs. • The Public Responsibilities Committee oversees risk management related to GE's public policy initiatives, the environment and similar matters, and monitors the Company's environmental, health and safety compliance. • The Management Development...

  • Page 42
    ...This document articulates the enterprise risk objectives, its key universe of risks and the supporting limit structure. GE Capital's risk appetite is determined relative to its desired risk objectives, including, but not limited to credit ratings, capital levels, liquidity 40 GE 2011 ANNUAL REPORT

  • Page 43
    ... risk officers, current portfolio levels, strategic planning, and regulatory and rating agency expectations. The Enterprise Risk Appetite is presented to the GECC Board and the GE Risk Committee for review and approval at least annually. On a quarterly basis, the status of GE Capital's performance...

  • Page 44
    Summary of Operating Segments General Electric Company and consolidated affiliates (In millions) 2011 2010 2009 2008 2007 REVENUES Energy Infrastructure Aviation Healthcare Transportation Home & Business Solutions Total industrial revenues GE Capital Total segment revenues Corporate items and ...

  • Page 45
    ... prices ($0.2 billion), partially offset by higher inï¬,ation, primarily nonmaterial related ($0.1 billion), and lower other income ($0.1 billion). Incremental research and development and GEnx product launch costs offset higher productivity. Aviation revenues of $17.6 billion in 2010 decreased...

  • Page 46
    ... primarily driven by an increase in U.S. and international locomotive sales and growth in our global mining equipment business. The increase in service revenue was due to higher overhauls and increased service productivity. Segment profit of $0.8 billion in 2011 increased $0.4 billion, or over 100...

  • Page 47
    ... $ 48,906 $ 1,325 TOTAL ASSETS (In millions) $552,514 2011 $565,337 2010 2009 REVENUES Commercial Lending and Leasing (CLL) Consumer Real Estate Energy Financial Services GE Capital Aviation Services (GECAS) SEGMENT PROFIT (LOSS) $ 18,178 16,781 3,712 1,223 5,262 $ 2,720 3,551 (928) 440 1,150...

  • Page 48
    ...-2005 IRS audit, lower credit losses and higher investment income, partially offset by higher impairments related to our operating lease portfolio of commercial aircraft. CORPORATE ITEMS AND ELIMINATIONS (In millions) 2011 2010 2009 REVENUES Gains on disposed businesses Insurance activities NBCU...

  • Page 49
    ... of taxes, primarily reï¬,ected earnings from operations of BAC of $0.3 billion, Australian Home Lending of $0.1 billion and Consumer Mexico of $0.1 billion, partially offset by incremental reserves for excess interest claims related to our loss-sharing arrangement on the 2008 sale of GE Money Japan...

  • Page 50
    ... reported results increased revenues by $2.5 billion in 2011, increased revenues by $0.5 billion in 2010 and decreased revenues by $3.9 billion in 2009. GE global revenues, excluding GECS, in 2011 were $54.3 billion, up 9% over 2010. Increases in growth markets of 29% in Latin America, 28% in China...

  • Page 51
    ..., direct mortgage loans (a majority of which were originated in 2006 and 2005), not other structured products such as collateralized debt obligations. Substantially all of our RMBS are in a senior position in the capital structure of the deals and more than 75% are agency bonds or insured by...

  • Page 52
    ... held for sale in the ordinary course of business, as well as equity investments. WORKING CAPITAL, representing GE current receivables and inventories, less GE accounts payable and progress collections, increased $1.6 billion at December 31, 2011, compared to December 31, 2010 due to increases in...

  • Page 53
    ... used in many industries, including the construction, manufacturing, transportation, media, communications, entertainment and healthcare industries. The portfolios in our Real Estate, GECAS and Energy Financial Services businesses are collateralized by commercial real estate, commercial aircraft...

  • Page 54
    ...31, 2011, compared with $11.5 billion (3.6% of outstanding receivables) at December 31, 2010. Nonearning receivables decreased from December 31, 2010, primarily due to write-offs and discounted payoffs in Real Estate, improved performance in Commercial and improvements in our entry rates in Consumer...

  • Page 55
    ... 31, 2010, to 34.3% at December 31, 2011, primarily due to an increase in nonearning receivables in our senior secured lending portfolio, partially offset by a reduction in nonearning receivables related to account restructuring in our asset-backed lending portfolio and improved delinquency in...

  • Page 56
    ... 31, 2010 to 3.9% at December 31, 2011, driven primarily by write-offs related to settlements and payoffs from impaired loan borrowers and improvement in collateral values. The Real Estate financing receivables portfolio is collateralized by income-producing or owner-occupied commercial properties...

  • Page 57
    ...at Real Estate at December 31, 2011, $7.9 billion are currently paying in accordance with the contractual terms of the loan and are typically loans where the borrower has adequate debt service coverage to meet contractual interest obligations. Impaired loans at CLL primarily represent senior secured...

  • Page 58
    ... in lieu of, fees and rate increases. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has typically resulted in the conclusion that the modified terms are not at current market rates of interest, even if the modi...

  • Page 59
    ... financial institutions on a short-term basis and is secured by U.S. Treasury securities ($9.6 billion) and sovereign bonds of non-focus countries ($7.8 billion), where the value of our collateral exceeds the amount of our cash exposure. We manage counterparty exposure, including credit risk...

  • Page 60
    ... in GE Capital. GECS relies on a diversified source of funding, including the unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail funding products, bank borrowings and securitizations to fund its balance sheet, in addition to cash generated through...

  • Page 61
    ... these requirements to large savings and loan holding companies through separate rulemaking or by order. We expect that GECS capital allocation planning will be subject to FRB review, which could affect the timing of the GE Capital dividend to the parent. Actions taken to strengthen and maintain...

  • Page 62
    ... shareowners' equity and a related EPS charge of $0.08. As a result and beginning in the fourth quarter of 2011, we are no longer required to pay the preferred share dividends of $0.3 billion annually. The preferred shares were redeemed on October 17, 2011. EXCHANGE RATE AND INTEREST RATE RISKS...

  • Page 63
    ... it does not constitute an addition to pre-tax income under current U.S. GAAP. In addition, in connection with certain subordinated debentures for which GECC receives equity credit by rating agencies, GE has agreed to promptly return dividends, distributions or other GE 2011 ANNUAL REPORT 61

  • Page 64
    ... 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 and deposits, as well as financing receivables collections, sales...

  • Page 65
    ... used by many financial institutions. The assets we securitize include: receivables secured by equipment, commercial real estate, credit card receivables, ï¬,oorplan inventory receivables, GE trade receivables and other assets originated and underwritten by us in the ordinary course of business...

  • Page 66
    ...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...

  • Page 67
    ...internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 9.0% to 13.75%. Valuations using the market approach reï¬,ect prices and other relevant observable information generated by market transactions involving comparable businesses. GE 2011 ANNUAL REPORT 65

  • Page 68
    ... 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 ï¬,ows. For our insurance activities remaining in continuing operations, we periodically test for impairment our deferred acquisition costs and...

  • Page 69
    ... to be resolved over many years, during which time relevant developments and new 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...

  • Page 70
    ... in 2011, 2010 and 2009, respectively. Aviation accounts for the largest share of GE's research and development expenditures with funding from both GE and customer funds. Energy Infrastructure's Energy business and Healthcare also made significant expenditures funded primarily by GE. Orders and...

  • Page 71
    ...,793 Long-term borrowings 243,459 293,323 Common shares outstanding-average (in thousands) 10,591,146 10,661,078 Common shareowner accounts-average 570,000 588,000 Employees at year end 131,000 121,000 United States (c) 170,000 152,000 Other countries (c) NBCU - 14,000 Total employees GE DATA $154...

  • Page 72
    Statement of Earnings General Electric Company and consolidated affiliates For the years ended December 31 (In millions; per-share amounts in dollars) 2011 2010 2009 REVENUES Sales of goods Sales of services Other income (Note 17) GECS earnings from continuing operations GECS revenues from ...

  • Page 73
    ... affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis. See Note 1. In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECS...

  • Page 74
    ...615,376,000 shares outstanding at year-end 2011 and 2010, respectively) Accumulated other comprehensive income-net (b) Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other capital Retained earnings Less common stock held in treasury Total GE shareowners' equity...

  • Page 75
    ... affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis. See Note 1. In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECS...

  • Page 76
    ... Net increase (decrease) in bank deposits Newly issued debt (maturities longer than 90 days) Repayments and other reductions (maturities longer than 90 days) Repayment of preferred stock Net dispositions (purchases) of GE shares for treasury Dividends paid to shareowners Capital contribution from GE...

  • Page 77
    ... affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis. See Note 1. In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECS...

  • Page 78
    ... Segments-These comprise our six businesses, focused on the broad markets they serve: Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. Prior-period information has been reclassified to be consistent with how we managed our businesses in 2011...

  • Page 79
    ... pricing strategy of the business and considers product configuration, geography, customer type, and other market specific factors. 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...

  • Page 80
    ...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...

  • Page 81
    ...adequacy of our allowance for losses on Real Estate financing receivables, including loan-to-value ratios, collateral values at the individual loan level, debt service coverage ratios, delinquency status, and economic factors including interest rate and real estate market GE 2011 ANNUAL REPORT 79

  • Page 82
    ... Retail Credit Classification and Account Management policy issued in June 2000. We believe that the allowance for losses would not be materially different had we not re-aged these accounts. For commercial loans, we evaluate changes in terms and conditions to determine whether those changes meet...

  • Page 83
    ... 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 GE 2011 ANNUAL REPORT...

  • Page 84
    ... consider the current interest rate, currency and credit environment, as well as other published data, such as rating agency market reports and current appraisals. These reviews are performed within each business by the asset and risk managers, pricing committees and valuation committees. A detailed...

  • Page 85
    ... are not specific to the attributes of the specific collateral or appraisal information may not be reï¬,ective of current market conditions due to the passage of time and the occurrence of market events since receipt of the information. For real estate, fair values are GE 2011 ANNUAL REPORT 83

  • Page 86
    ... pricing multiples of similar businesses and comparable transactions, and possible control premium. These investments are included in Level 1 or Level 3, as appropriate, determined at the time of the transaction. Accounting Changes On January 1, 2011, we adopted Financial Accounting Standards Board...

  • Page 87
    ... the long-term outlook for its businesses. We believe that these assumptions are consistent with market participant assumptions. We derived discount rates using a weighted average cost of capital. The cost of equity was determined using the capital asset pricing model and the cost of debt financing...

  • Page 88
    ... $1,635 $ 2,587 Short-term borrowings Accounts payable Other GE current liabilities Long-term borrowings All other liabilities Liabilities of businesses held for sale Assets at December 31, 2011 and December 31, 2010, primarily comprised cash, financing receivables and a deferred tax asset for...

  • Page 89
    ... of consumer activity, market activity regarding other personal loan companies and higher claims severity, may continue to have an adverse effect on claims development. GE Money Japan losses from discontinued operations, net of taxes, were $238 million, $1,671 million and $158 million in 2011, 2010...

  • Page 90
    ... taxes, were $34 million, $7 million and $1 million in 2011, 2010 and 2009, respectively. OTHER FINANCIAL SERVICES In the fourth quarter of 2010, we entered into agreements to sell our Consumer RV Marine portfolio and Consumer Mexico business. The Consumer RV Marine and Consumer Mexico dispositions...

  • Page 91
    ... of individual direct mortgage loans of financial institutions. The fair value of investment securities increased to $47,374 million at December 31, 2011, from $43,938 million at December 31, 2010, primarily due to the impact of lower interest rates and funding in our CLL business of investments...

  • Page 92
    ...We discount the cash ï¬,ows using the original effective interest rate of the security. The vast majority of our RMBS have investment grade credit ratings from the major rating agencies and are in a senior position in the capital structure of the deal. Of our total RMBS at December 31, 2011 and 2010...

  • Page 93
    ...on trading securities of $22 million, $(7) million and $408 million in 2011, 2010 and 2009, respectively. GE current receivables of $112 million and $193 million at December 31, 2011 and 2010, respectively, arose from sales, principally of Healthcare and Aviation goods and services, on open account...

  • Page 94
    ...nancing 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...

  • Page 95
    ... additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios. Debt Business Properties Total Real Estate financing receivables CONSUMER Non-U.S. residential mortgages Non-U.S. installment and...

  • Page 96
    ...16 & 17 (a) Balance at January 1, 2010 Provision charged to operations Balance at December 31, 2010 (In millions) Other (b) Gross write-offs (c) Recoveries (c) COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE $1,180 575 244...

  • Page 97
    ... at January 1, 2009 Provision charged to operations Other (a) Gross write-offs (b) Recoveries (b) Balance at December 31, 2009 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE $ 846 311 163 1 1,321 58 58 28 1,465 282...

  • Page 98
    ...during 2011. (d) The GECAS business of GE Capital recognized impairment losses of $301 million in 2011 and $438 million in 2010 recorded in the caption "Other costs and expenses" in the Statement of Earnings to reflect adjustments to fair value based on an evaluation of average current market values...

  • Page 99
    ...using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed...

  • Page 100
    ... used cash ï¬,ows that reï¬,ected management's forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of our step one testing, the fair values of each of the GE industrial reporting units and the CLL, Consumer, Energy Financial...

  • Page 101
    ...such as power generation, aircraft engines and aeroderivative units) and long-term product maintenance or extended warranty arrangements. (c) Included loans to GECS of $388 million and $856 million at December 31, 2011 and 2010, respectively. (d) GECS investments in real estate consisted principally...

  • Page 102
    Note 10. Borrowings and Bank Deposits SHORT-TERM BORROWINGS 2011 December 31 (Dollars in millions) Amount Average rate (a) 2010 Amount Average rate (a) GE Commercial paper Payable to banks Current portion of long-term borrowings Other Total GE short-term borrowings GECS $ 1,801 88 41 254 2,184...

  • Page 103
    ... of service and earnings. PENSION PLAN PARTICIPANTS Principal pension plans Other pension plans December 31, 2011 Total (a) Life insurance benefits are accounted for mainly by a net-level-premium method using estimated yields generally ranging from 3.0% to 8.5% in both 2011 and 2010. Active...

  • Page 104
    ... future service of employees. FUNDING POLICY for the GE Pension Plan is to contribute amounts compensation levels. PBO is ABO increased to reï¬,ect expected future compensation. PROJECTED BENEFIT OBLIGATION Principal pension plans (In millions) 2011 2010 Other pension plans 2011 2010 Balance at...

  • Page 105
    ... in order to meet the near term benefit payment and other cash needs. The GE Pension Plan holds short-term debt securities to meet its liquidity needs. GE Pension Trust assets are invested subject to the following additional guidelines: • Short-term securities must generally be rated A-1/P-1 or...

  • Page 106
    ... for the GE Pension Plan. CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 January 1, 2011 Net realized gains (losses) Net unrealized gains (losses) Purchases, issuances and settlements Transfers in and/or out of Level 3 (a) December 31, 2011 (In millions) DEBT SECURITIES Fixed...

  • Page 107
    ... service of employees. FUNDING POLICY. We fund retiree health benefits on a pay-as- ance benefits to certain eligible participants and these participants share in the cost of healthcare benefits. These plans cover approximately 210,000 retirees and dependents. COST OF PRINCIPAL RETIREE BENEFIT...

  • Page 108
    ...rated A-2/P-2 and other short-term securities as may be approved by the plan fiduciaries. 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...

  • Page 109
    ...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 2012. GE 2011 ANNUAL...

  • Page 110
    ...Revenue Service (IRS) completed the audit of our consolidated U.S. income tax returns for 2006-2007, except for certain issues that remain under examination. During 2010, the IRS completed the audit of our consolidated U.S. income tax returns for 2003-2005. At December 31, 2011, the IRS was auditing...

  • Page 111
    ... Consolidated 2011 2010 2009 2011 GE 2010 2009 2011 GECS 2010 2009 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) NBCU gain U.S. business credits...

  • Page 112
    ...Total equity balance at December 31 (a) Total dividends and other transactions with shareowners decreased equity by $10,530 million in 2011, $5,701 million in 2010 and $5,049 million in 2009. (b) GE has 50 million authorized shares of preferred stock ($1.00 par value). No such shares were issued as...

  • Page 113
    ...- $3,040 1,947 275 $5,262 $1,696 (a) Consisted of a number of individually insignificant noncontrolling interests in partnerships and consolidated affiliates. (b) The preferred stock paid cumulative dividends at an average rate of 6.81% in 2010 and was retired in 2011. GE 2011 ANNUAL REPORT 111

  • Page 114
    ... were used in arriving at the fair value of options granted during 2011, 2010 and 2009, respectively: risk-free interest rates of 2.6%, 2.9% and 3.2%; dividend yields of 3.9%, 3.9% and 3.9%; expected volatility of 30%, 35% and 49%; and expected lives of seven years and eight months, six years and...

  • Page 115
    ... outstanding option and restricted stock grants. Note 18. GECS Revenues from Services (In millions) 2011 2010 2009 Interest on loans (a) Equipment leased to others Fees (a) Investment income (a)(b) Financing leases (a) Associated companies (c) Premiums earned by insurance activities Real estate...

  • Page 116
    ... share in risks and rewards of these product programs. Under these arrangements, participation fees earned and recorded as other income totaled $12 million, $4 million and $1 million for the years 2011, 2010 and 2009, respectively. Payments to participants are recorded as costs of services...

  • Page 117
    ... senior secured loans of high-quality, middle-market companies in a variety of industries. Such securities are mainly investment grade. (In millions) Level 1 (a) Level 2 (a) Level 3 (b) Netting adjustment (c) Net balance DECEMBER 31, 2011 ASSETS Investment securities Debt U.S. corporate State and...

  • Page 118
    ... basis for the years ended December 31, 2011 and 2010, respectively. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowners' equity. CHANGES IN LEVEL 3 INSTRUMENTS FOR THE YEAR ENDED DECEMBER 31, 2011...

  • Page 119
    ...) 184 $(4,793) (a) Includes fair value adjustments associated with private equity and real estate funds of $(24) million and $(198) million during 2011 and 2010, respectively. (b) Includes impairments related to real estate equity properties and investments recorded in other costs and expenses of...

  • Page 120
    ...800 million at December 31, 2011 and 2010, respectively. A description of how we estimate fair values follows. Loans Based on a discounted future cash ï¬,ows methodology, using current market interest rate data adjusted for inherent credit risk or quoted market prices and recent transactions, if...

  • Page 121
    ... 31 (In millions) 2011 2010 December 31 (In millions) 2011 Fair value Assets Liabilities 2010 Fair value Assets Liabilities Ordinary course of business lending commitments (a) Unused revolving credit lines (b) Commercial (c) Consumer-principally credit cards DERIVATIVES ACCOUNTED FOR AS HEDGES...

  • Page 122
    ... as economic hedges of changes in interest rates, currency exchange rates, commodity prices and other risks. Gains or losses related to the derivative are typically recorded in GECS revenues from services or other income, based on our accounting policy. In general, the earnings effects of the item...

  • Page 123
    ... of our Commercial, Real Estate and Consumer financing receivables portfolios. For each portfolio, we describe the characteristics of the financing receivables and provide information about collateral, payment performance, credit quality indicators, and impairment. We manage these portfolios using...

  • Page 124
    ... on a cash basis, for the years ended December 31, 2011 and 2010, respectively, principally in our CLL Americas business. The total average investment in impaired loans for the years ended December 31, 2011 and 2010 was $5,866 million and $5,292 million, respectively. 122 GE 2011 ANNUAL REPORT

  • Page 125
    .... Our asset managers have deep industry expertise that enables us to identify the optimum approach to default situations. We price risk premiums for weaker credits at origination, closely monitor changes in creditworthiness through our risk ratings and watch list process, and are engaged early with...

  • Page 126
    ...on a cash basis, for the years ended December 31, 2011 and 2010, respectively, principally in our Real Estate-Debt portfolio. The total average investment in impaired loans for the years ended December 31, 2011 and 2010 was $9,678 million and $8,237 million, respectively. 124 GE 2011 ANNUAL REPORT

  • Page 127
    ... rate that is at current market rates of interest given the risk characteristics of the loan or other consideration that compensates us for the value of the concession. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios...

  • Page 128
    ... credit card financing. A substantial majority of these cards are not for general use and are limited to the products and services sold by the retailer. The private label portfolio is diverse with no metropolitan area accounting for more than 5% of the related portfolio. 126 GE 2011 ANNUAL REPORT

  • Page 129
    ... scores, we adequately price for the incremental risk at origination and monitor credit migration through our risk ratings process. We continuously adjust our credit line underwriting management and collection strategies based on customer behavior and risk profile changes. CONSUMER-OTHER 2011 Non...

  • Page 130
    ... to fund commercial, middle-market and equipment loans; we are the collateral manager for these entities; (2) joint ventures that lease light industrial equipment; (3) insurance entities that, among other lines of business, provide property and casualty and workers' compensation coverage for GE; and...

  • Page 131
    ... collected from customers on financing receivables sold to investors with our own cash prior to payment to a CSE provided our short-term credit rating does not fall below levels specified in our securitization agreements. We are also owed amounts from the CSEs related to purchased financial assets...

  • Page 132
    ... made to airlines in 2011 for future sales under our GE90 and GEnx engine campaigns. The GECAS business of GE Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft with list prices approximating $20,577 million and secondary orders with airlines for used aircraft of...

  • Page 133
    ... from our sale of GE Money Japan are further discussed in Note 2. All other potential payments related to contingent consideration are insignificant. Our guarantees are provided in the ordinary course of business. We underwrite these guarantees considering economic, liquidity and credit risk of the...

  • Page 134
    ... supplemental information related to GE and GECS cash ï¬,ows is shown below. (In millions) 2011 2010 2009 GE NET DISPOSITIONS (PURCHASES) OF GE SHARES FOR TREASURY Open market purchases under share repurchase program Other purchases Dispositions GECS ALL OTHER OPERATING ACTIVITIES $ (2,065) (100...

  • Page 135
    ...revised allocation methodology better aligns segment operating costs to active employee costs that are managed by the segments. This change did not significantly affect our reported segment results. On January 28, 2011, we sold the assets of our NBCU business in exchange for cash and a 49% interest...

  • Page 136
    ... 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. Real Estate offers a comprehensive range of capital...

  • Page 137
    ... million to segment pre-tax income of Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital operating segments, respectively, for the year ended December 31, 2011. Aggregate summarized financial information for significant associated companies assuming...

  • Page 138
    ...618 $28,715 8,278 12,662 1,007 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 139
    ... the Preferred Stock Redemption (In millions; except earnings per share) 2011 2010 V% Industrial Cash Flow from Operating Activities (Industrial CFOA) (In millions) 2011 2010 2009 2008 2007 Cash from GE's operating activities, as reported $12,057 $14,746 $16,405 $19,138 $23,301 Less dividends from...

  • Page 140
    ... service-related costs of providing pension benefits to our employees. As such, we believe that our measure of Operating earnings provides management and investors with a useful measure of the operational results of our business. Other components of GAAP pension cost are mainly driven by market...

  • Page 141
    ... 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. We use ENI to measure the size of our GE Capital segment. We believe that this measure is a useful indicator of the capital (debt...

  • Page 142
    ... not represent cash paid for income taxes in the current accounting period. Also referred to as "actual tax rate" or "tax rate." ENDING NET INVESTMENT (ENI) is the total capital we have invested in the financial services business. It is the sum of short-term borrowings, long-term borrowings and...

  • Page 143
    ...-year terms, to provide specified services for products in our Energy Infrastructure, Aviation and Transportation 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...

  • Page 144
    ...nancial and credit markets on the availability and cost of General Electric Capital Corporation's (GECC) funding and on our ability to reduce GECC's asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults...

  • Page 145
    ... used under license. From FORTUNE Magazine, March 21, 2011 © 2011 Time Inc. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Licensee. Visit our interactive online annual report at www.ge.com/annualreport Thanks to the customers, partners and GE employees...

  • Page 146
    General Electric Company Fairfield, Connecticut 06828 www.ge.com GE  Annual Report 3.EPC055148101A.102