GE 2007 Annual Report Download - page 56

54 ge 2007 annual report
’   
we used in determining unrealized gains and losses are those
defi ned by relevant accounting standards and are not a fore -
cast of future gains or losses. We presently intend to hold our
investment securities that are in an unrealized loss position at
December 31, 2007, at least until we can recover their respective
amortized cost and we have the ability to hold our debt securities
until their maturities. See note 9.
WORKING CAPITAL, representing GE inventories and receivables
from customers, less trade payables and progress collections,
was $5.2 billion at December 31, 2007, down $1.5 billion from
December 31, 2006, refl ecting higher progress collections at
Energy.
We discuss current receivables and inventories, two important
elements of working capital, in the following paragraphs.
CURRENT RECEIVABLES for GE amounted to $15.1 billion at the
end of 2007 and $13.8 billion at the end of 2006, and included
$11.0 billion due from customers at the end of 2007 compared
with $8.8 billion at the end of 2006. Turnover of customer receiv-
ables from sales of goods and services was 9.9 in 2007, compared
with 10.0 in 2006. 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 10.
INVENTORIES for GE amounted to $12.8 billion at December 31,
2007, up $2.9 billion from the end of 2006. This increase refl ected
higher inventories from acquisitions and at Infrastructure, which
is in line with anticipated growth. GE inventory turnover was 7.9
and 8.8 in 2007 and 2006, respectively. See note 11.
FINANCING RECEIVABLES is our largest category of assets and
represents one of our primary sources of revenues. The portfolio
of fi nancing receivables, before allowance for losses, was $389.9
billion at December 31, 2007, and $332.6 billion at December 31,
2006. The related allowance for losses at December 31, 2007,
amounted to $4.3 billion, compared with $4.0 billion at December 31,
2006, representing our best estimate of probable losses inherent
in the portfolio. The 2007 increase refl ected overall growth in our
portfolio, increased delinquencies in the U.S. at GE Money, and
the weaker U.S. dollar, primarily at GE Money; partially offset by
continued strong credit quality at Commercial Finance.
A discussion of the quality of certain elements of the fi nancing
receivables portfolio follows. For purposes of that discussion,
“delinquent” receivables are those that are 30 days or more past
due; and “nonearning” receivables are those that are 90 days or
more past due (or for which collection has otherwise become
doubtful).
Commercial Finance fi nancing receivables, before allowance
for losses, totaled $187.9 billion at December 31, 2007, compared
with $154.2 billion at December 31, 2006, and consisted of loans
and fi nancing leases to the equipment, commercial and industrial,
and real estate industries. This portfolio of receivables increased
primarily from core growth ($63.3 billion), acquisitions ($14.3 billion),
and the weaker U.S. dollar ($5.7 billion), partially offset by securi-
tizations and sales ($47.1 billion). Related nonearning receivables
were $1.7 billion (0.9% of outstanding receivables) at December 31,
2007, and $1.6 billion (1.0% of outstanding receivables) at year-
end 2006. Commercial Finance fi nancing receivables are generally
backed by assets and there is a broad spread of geographic and
credit risk in the portfolio.
GE Money fi nancing receivables, before allowance for losses,
were $174.8 billion at December 31, 2007, compared with
$150.4 billion at December 31, 2006, 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 ($15.0 billion), the weaker
U.S. dollar ($9.8 billion) and acquisitions ($1.4 billion), partially off-
set by loans transferred to assets held for sale ($1.0 billion) and
dispositions ($1.0 billion). Related nonearning receivables were
$3.7 billion at December 31, 2007, compared with $3.2 billion
at December 31, 2006, both representing 2.1% of outstanding
receivables. The increase was primarily related to the weaker U.S.
dollar at the end of the year and overall growth in the portfolio.
Infrastructure fi nancing receivables, before allowance for
losses, were $22.1 billion at December 31, 2007, compared with
$21.2 billion at December 31, 2006, and consisted primarily of
loans and leases to the commercial aircraft and energy industries.
Related nonearning receivables were insignifi cant at December 31,
2007 and 2006.
Other fi nancing receivables, before allowance for losses, were
$5.1 billion and $6.9 billion at December 31, 2007, and December 31,
2006, respectively, and consisted primarily of fi nancing receivables
in consolidated, liquidating securitization entities. This portfolio
of receivables decreased because we have stopped transferring
assets to these entities. Related nonearning receivables at
December 31, 2007, were $0.1 billion (1.4% of outstanding receiv-
ables) compared with $0.1 billion (1.2% of outstanding receivables)
at December 31, 2006.
Delinquency rates on managed Commercial Finance equipment
loans and leases and managed GE Money fi nancing receivables
follow.
December 31
2007 2006 2005
Commercial Finance 1.21% 1.22% 1.31%
GE Money 5.36 5.21 5.34
U.S. 5.52 4.93 5.00
Non-U.S. 5.30 5.32 5.47
Delinquency rates at Commercial Finance decreased from
December 31, 2005, through December 31, 2007, refl ecting con-
tinued strong credit quality.
Delinquency rates at GE Money increased from December 31,
2006, to December 31, 2007, primarily as a result of the deterio-
rating consumer credit environment in the U.S. At December 31,
2007, approximately one-third of our U.S.-managed portfolio, which
consisted of credit card, installment and revolving loans, was
receivable from subprime borrowers. We had no U.S. subprime
residential mortgage loans at December 31, 2007. The U.S. expe-
rience had not affected our non-U.S. portfolios at December 31,
2007; those delinquency rates remained fairly stable. See notes
12 and 13.