GE 2005 Annual Report Download - page 49

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(49)
CURRENT RECEIVABLES for GE amounted to $15.1 billion at the end of 2005 and $14.5 billion at the end of
2004, and included $10.3 billion due from customers at the end of 2005 compared with $10.2 billion at the end of
2004. Turnover of customer receivables from sales of goods and services was 9.0 in 2005, compared with 9.4 in
2004. Other current receivables are primarily amounts that did not originate from sales of GE goods or services,
such as advances to suppliers in connection with large contracts. See note 11.
INVENTORIES for GE amounted to $10.3 billion at December 31, 2005, up $0.7 billion from the end of 2004.
This increase reflected higher inventories at Aviation and the effects of 2005 acquisitions. GE inventory turnover
was 8.3 in 2005 compared with 8.4 in 2004. See note 12.
FINANCING RECEIVABLES is our largest category of assets and represents one of our primary sources of
revenues. The portfolio of financing receivables, before allowance for losses, was $292.2 billion at December 31,
2005, and $288.3 billion at December 31, 2004. The related allowance for losses at December 31, 2005, amounted
to $4.6 billion, compared with $5.6 billion at December 31, 2004, representing our best estimate of probable losses
inherent in the portfolio. The allowance for losses decreased $1.0 billion from 2004. The 2005 decrease reflected
write-offs of previously reserved financing receivables ($0.8 billion), principally commercial aviation loans and
leases in our Infrastructure segment, and the recently strengthening U.S. dollar ($0.2 billion). During 2005, changes
in U.S. bankruptcy laws prompted certain customers to accelerate filing for bankruptcy protection. These changes
had an inconsequential effect on our allowance and earnings. Balances at December 31, 2005 and 2004, included
securitized, managed GE trade receivables of $3.9 billion and $3.5 billion, respectively. See notes 13 and 14.
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; “nonearning” receivables
are those that are 90 days or more past due (or for which collection has otherwise become doubtful); and “reduced-
earning” receivables are commercial receivables whose terms have been restructured to a below-market yield.
Commercial Finance financing receivables, before allowance for losses, totaled $131.8 billion at December
31, 2005, compared with $124.5 billion at December 31, 2004, and consisted of loans and leases to the equipment
and leasing, commercial and industrial and real estate industries. This portfolio of receivables increased primarily
from core growth ($39.9 billion) and acquisitions ($10.6 billion), partially offset by securitizations and sales ($37.3
billion) and the recently strengthening U.S. dollar ($2.0 billion). Related nonearning and reduced-earning
receivables were $1.3 billion (1.0% of outstanding receivables) at December 31, 2005, and $1.4 billion (1.1% of
outstanding receivables) at year-end 2004. Commercial Finance financing receivables are generally backed by assets
and there is a broad spread of geographic and credit risk in the portfolio.
Consumer Finance financing receivables, before allowance for losses, were $130.1 billion at December 31,
2005, compared with $127.8 billion at December 31, 2004, and consisted primarily of card receivables, installment
loans, auto loans and leases, and residential mortgages. This portfolio of receivables increased primarily as a result
of core growth ($11.3 billion) and acquisitions ($0.4 billion), partially offset by the recently strengthening U.S.
dollar ($7.8 billion), securitizations ($0.7 billion), loans transferred to assets held for sale ($0.5 billion) and
dispositions ($0.4 billion). Nonearning consumer receivables were $2.8 billion at December 31, 2005, compared
with $2.5 billion at December 31, 2004, representing 2.1% and 2.0% of outstanding receivables, respectively. The
increase was primarily related to higher nonearning receivables in our European secured financing business, a
business that tends to experience relatively higher delinquencies but lower losses than the rest of our consumer
portfolio.