GE 2005 Annual Report Download - page 54

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(54)
Contractual Obligations
As defined by reporting regulations, our contractual obligations for future payments as of December 31, 2005,
follow.
Payments due by period
(In billions) Total 2006 2007-2008 2009-2010
2011and
thereafter
Borrowings (note 18) $ 370.4 $ 158.2 $ 87.1 $ 45.5 $ 79.6
Interest on borrowings 66.0 12.0 18.0 10.0 26.0
Operating lease obligations (note 5) 6.8 1.4 2.2 1.5 1.7
Purchase obligations(a)(b) 58.0 37.0 13.0 4.0 4.0
Insurance liabilities (note 19)(c) 28.0 5.0 6.0 4.0 13.0
Other liabilities(d) 60.0 13.0 6.0 4.0 37.0
Contractual obligations of discontinued
operations(e) 12.0 1.0 1.0 1.0 9.0
(a) Included all take-or-pay arrangements, capital expenditures, contractual commitments to purchase equipment that will be classified as
equipment 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 29.
(c) Included guaranteed investment contracts (GICs), 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. 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 27 for further information on certain of these items.
(e) Included payments for borrowings and interest on borrowings of $3.6 billion, operating lease obligations of $0.2 billion, other liabilities of
$2.8 billion, and insurance liabilities of $5.4 billion. Insurance liabilities primarily included workers’ compensation tabular indemnity loan
and long-term liability claims.
Off-Balance Sheet Arrangements
We use off-balance sheet arrangements in the ordinary course of business to improve shareowner returns. These
securitization transactions also serve as funding sources for a variety of diversified lending and securities
transactions. Our securitization transactions are similar to those used by many financial institutions.
In a typical securitization transaction, we sell assets to a special purpose entity (SPE), which has obtained
cash by issuing beneficial interests, usually debt, to third parties. Securitization entities commonly use derivatives
such as interest rate swaps to match interest rate characteristics of the assets with characteristics of the related
beneficial interests. An example is an interest rate swap that serves to convert fixed rate assets to a variable rate,
matching the cash flows on SPE floating rate debt. An investor in a beneficial interest usually has recourse to assets
in the associated SPE, and often benefits from credit enhancements supporting those assets. The most common
credit enhancement is overcollateralization, where we securitize a greater principal amount of assets than debt issued
by the SPE. Our other credit enhancements are in the form of liquidity and credit support agreements and guarantee
and reimbursement contracts. We have provided $0.1 billion at year-end 2005 representing our best estimate of the
fair value of potential losses under these arrangements.