GE 2009 Annual Report Download - page 49

’   
GE 2009 ANNUAL REPORT 47
LIQUIDITY AND BORROWINGS
We manage our liquidity to help ensure access to sufficient
funding at acceptable costs to meet our business needs and
financial obligations throughout business cycles. Our obligations
include principal payments on outstanding borrowings, interest on
borrowings, purchase obligations for inventory and equipment and
general obligations such as collateral deposits held or collateral
required to be posted to counterparties, payroll and general
expenses. We rely on cash generated through our operating
activities as well as unsecured and secured funding sources,
including commercial paper, term debt, bank borrowings, securi-
tization and other retail funding products.
Sources for payment of our obligations are determined
through our annual financial and strategic planning processes.
Our 2010 funding plan anticipates repayment of principal on
outstanding short-term borrowings ($133.1 billion at December 31,
2009) through commercial paper issuances; cash on hand;
long-term debt issuances; collections of financing receivables
exceeding originations; and deposit funding and alternative
sources of funding.
Interest on borrowings is primarily funded through interest
earned on existing financing receivables. During 2009, GECS
earned interest income on financing receivables of $23.4 billion,
which more than offset interest expense of $17.9 billion. Purchase
obligations and other general obligations are funded through
customer sales revenues (industrial) or collection of principal on
our existing portfolio of loans and leases (financial services), cash
on hand and operating cash flow.
We maintain a strong focus on our liquidity. Since the fourth
quarter of 2008, we have taken a number of actions to strengthen
and maintain liquidity, including:
• At December 31, 2009, our cash and equivalents were
$72.3 billion and committed credit lines were $51.7 billion,
which in the aggregate were more than twice our GECS
commercial paper borrowings balance. We intend to main-
tain committed credit lines and cash in excess of GECS
commercial paper borrowings going forward.
• In 2009, we reduced ENI (excluding the effects of currency
exchange rates) in our Capital Finance business by approxi-
mately $53 billion, primarily through slowing originations.
• GECS commercial paper borrowings were $47.3 billion
at December 31, 2009, compared with $71.8 billion at
December 31, 2008.
• We have completed our long-term debt funding target of
$38 billion for 2010, and in 2010 have issued $5.1 billion
(through February 15, 2010) towards our long-term debt
funding target for 2011.
• During 2009, we issued an aggregate of $23.2 billion of long-
term debt (including $3.2 billion in the fourth quarter) that is not
guaranteed under the Federal Deposit Insurance Corporation’s
(FDIC) Temporary Liquidity Guarantee Program (TLGP).
• At GECS, we are managing collections versus originations
to help support liquidity needs. In 2009, collections exceeded
originations by approximately $44.0 billion.
• As of December 31, 2009, we had issued notes from our
securitization platforms in an aggregate amount of $14.0 billion;
$4.3 billion of 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).
• In February 2009, we announced the reduction of the quarterly
GE stock dividend by 68%, from $0.31 per share to $0.10 per
share, effective with the dividend approved by the Board in
June 2009, which was paid in the third quarter. This reduction
had the effect of reducing cash outflows of the company by
approximately $4 billion in the second half of 2009 and will
save approximately $9 billion annually thereafter.
• In September 2008, we reduced the GECS dividend to GE
and suspended our stock repurchase program. Effective
January 2009, we fully suspended the GECS dividend to GE.
• In October 2008, we raised $15 billion in cash through
common and preferred stock offerings and we contributed
$15 billion to GECS, including $9.5 billion in the first quarter
of 2009 (of which $8.8 billion was further contributed to GE
Capital through capital contribution and share issuance), in
order to improve tangible capital and reduce leverage.
CASH AND EQUIVALENTS. We have cash and equivalents of
$72.3 billion at December 31, 2009, which is available to meet
Company needs. A substantial portion of this is freely available.
About $8 billion is in regulated entities and is subject to regulatory
restrictions. About $9 billion is held outside the U.S. and is available
to fund operations and other growth of non-U.S. subsidiaries; it
is also available to fund Company needs in the U.S. on a short-
term basis (without being subject to U.S. tax). We anticipate that
we will continue to generate cash from operating activities in the
future, which will be available to help meet our liquidity needs.
We also generate substantial cash from the principal collections
of loans and rentals from leased assets.
We have committed, unused credit lines totaling $51.7 billion
that had been extended to us by 59 financial institutions at
December 31, 2009. These lines include $36.8 billion of revolving
credit agreements under which we can borrow funds for periods
exceeding one year. Additionally, $14.4 billion are 364-day lines that
contain a term-out feature that allows us to extend borrowings for
one year from the date of expiration of the lending agreement.