GE 2009 Annual Report Download - page 54

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52 GE 2009 ANNUAL REPORT
GECS Cash Flow
GECS cash and equivalents were $64.4 billion at December 31,
2009, compared with $37.5 billion at December 31, 2008. GECS
cash from operating activities totaled $7.6 billion in 2009, compared
with cash from operating activities of $31.2 billion in 2008. This
decrease was primarily due to an overall decline in net earnings, a
current-year reduction in cash collateral held from counterparties
on derivative contracts of $6.9 billion and declines in taxes
payable ($2.7 billion). In addition, 2008 GECS cash from operating
activities benefited from an increase in cash collateral posted by
counterparties.
Consistent with our plan to reduce GECS asset levels, cash
from investing activities was $45.7 billion in 2009; $44.0 billion
resulted from a reduction in financing receivables, primarily from
collections exceeding originations and $9.1 billion resulted from
proceeds from business dispositions, including the consumer
businesses in Austria and Finland, the credit card and auto
businesses in the U.K., the credit card business in Ireland, a
portion of our Australian residential mortgage business and the
Thailand business. These sources were partially offset by cash
used for acquisitions of $5.7 billion, primarily for the acquisition
of Interbanca S.p.A.
GECS cash used for financing activities in 2009 reflected our
continued reduction in ending net investment. Cash used for
financing activities of $26.4 billion related primarily to a $26.9 bil-
lion reduction in borrowings (maturities 90 days or less), primarily
commercial paper, reductions in long-term borrowings partially
offset by the pre-funding of our 2010 long-term debt maturities,
and a $4.0 billion decrease in bank deposits, partially offset by a
capital contribution from GE to GECS of $9.5 billion.
GECS pays dividends to GE through a distribution of its
retained earnings, including special dividends from proceeds of
certain business sales. There were no dividends paid to GE in
2009 compared with $2.4 billion and $7.3 billion in 2008 and
2007, respectively. There were no special dividends paid to GE
in 2009 and 2008, compared with $2.4 billion in 2007.
Intercompany Eliminations
Effects of transactions between related companies are eliminated
and consist primarily of GECS dividends to GE or capital contri-
butions from GE to GECS; GE customer receivables sold to GECS;
GECS services for trade receivables management and material
procurement; buildings and equipment (including automobiles)
leased between GE and GECS; information technology (IT) and
other services sold to GECS by GE; aircraft engines manufactured
by GE that are installed on aircraft purchased by GECS from third-
party producers for lease to others; and various investments,
loans and allocations of GE corporate overhead costs. See Note
26 for further information related to intercompany eliminations.
Contractual Obligations
As defined by reporting regulations, our contractual obligations
for future payments as of December 31, 2009, follow.
Payments due by period
(In billions) Total 2010
2011
2012
– 2013
2014
– 2015 and
thereafter
Borrowings and bank
deposits (Note 10) $510.2 $160.8 $157.2 $65.2 $127.0
Interest on borrowings
and bank deposits 131.0 16.0 27.0 17.0 71.0
Operating lease obligations
(Note 19) 5.6 1.2 1.8 1.1 1.5
Purchase obligations (a) (b) 57.0 37.0 16.0 3.0 1.0
Insurance liabilities
(Note 11) (c) 20.0 2.0 5.0 3.0 10.0
Other liabilities (d) 97.0 24.0 11.0 11.0 51.0
Contractual obligations of
discontinued operations (e) 1.0 1.0 — — —
(a) Included all take-or-pay arrangements, capital expenditures, contractual commitments
to purchase equipment that will be leased to others, contractual commitments
related to factoring agreements, 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 24.
(c) Included contracts with reasonably determinable cash flows such as structured
settlements, certain property and casualty contracts, and guaranteed investment
contracts.
(d) Included an estimate of future expected funding requirements related to our
pension and postretirement benefit plans and included liabilities for unrecognized
tax benefits. 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 14 and 22 for
further information on certain of these items.
(e) Included payments for other liabilities.
Variable Interest Entities and
Off-Balance Sheet Arrangements
We securitize financial assets and arrange other forms of asset-
backed financing in the ordinary course of business to improve
shareowner returns and as an alternative source of funding. The
securitization transactions we engage in are similar to those used
by many financial institutions. Our securitization activities are
conducted using Variable Interest Entities (VIEs), principally QSPEs.
Certain of our VIEs are consolidated because we are consid-
ered to be the primary beneficiary of the entity. Our interests in
other VIEs for which we are not the primary beneficiary and
QSPEs are accounted for as investment securities, financing
receivables or equity method investments depending on the
nature of our involvement. At December 31, 2009, consolidated
variable interest entity assets and liabilities were $17.0 billion
and $15.2 billion, respectively, a decrease of $9.9 billion and
$6.2 billion from 2008, respectively. In the first quarter of 2009,
we deconsolidated PTL and removed $7.0 billion of assets and
$0.8 billion of liabilities from our balance sheet. The deconsolida-
tion was a result of our reducing our investment in PTL by
selling a 1% limited partnership interest to Penske Truck Leasing
Corporation, the general partner of PTL, whose majority share-
owner is a member of GE’s Board of Directors, coupled with our
resulting minority position on the PTL advisory committee and