GE 2011 Annual Report Download - page 64

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62 GE 2011 ANNUAL REPORT
• Changes in the fair value of derivatives designated as cash
fl ow hedges increased shareowners’ equity by $0.1 billion
in 2011, primarily refl ecting lower fair values of interest rate
and cross-currency hedges which were more than offset
by releases from AOCI contemporaneous with the earnings
effects of the related hedged items, principally as an adjust-
ment of interest expense on borrowings. The change in the
fair value of derivatives designated as cash fl ow hedges
increased shareowners’ equity by $0.5 billion and $1.6 billion
in 2010 and 2009, respectively. Further information about the
fair value of derivatives is provided in Note 22.
Statement of Cash Flows—Overview from 2009 through 2011
Consolidated cash and equivalents were $84.5 billion at
December 31, 2011, an increase of $5.6 billion from December 31,
2010. Cash and equivalents totaled $78.9 billion at December 31,
2010, an increase of $7.1 billion from December 31, 2009.
We evaluate our cash fl ow performance by reviewing our
industrial (non-fi nancial services) businesses and fi nancial ser-
vices businesses separately. Cash from operating activities (CFOA)
is the principal source of cash generation for our industrial busi-
nesses. The industrial businesses also have liquidity available via
the public capital markets. Our fi nancial services businesses use
a variety of fi nancial resources to meet our capital needs. Cash for
fi nancial services businesses is primarily provided from the issu-
ance of term debt and commercial paper in the public and private
markets and deposits, as well as fi nancing receivables collections,
sales and securitizations.
GE Cash Flow
GE cash and equivalents were $8.4 billion at December 31, 2011,
compared with $19.2 billion at December 31, 2010. GE CFOA
totaled $12.1 billion in 2011 compared with $14.7 billion and
$16.4 billion in 2010 and 2009, respectively. With respect to GE
CFOA, we believe that it is useful to supplement our GE Statement
of Cash Flows and to examine in a broader context the business
activities that provide and require cash.
GE CFOA decreased $2.7 billion compared with 2010, primar-
ily due to the impact of the disposal of NBCU. In 2010, GE CFOA
decreased $1.7 billion compared with 2009, primarily refl ecting
a decrease in progress collections.
(In billions) 2011 2010 2009
Operating cash collections (a) $ 93.6 $ 98.2 $104.1
Operating cash payments (81.5) (83.5) (87.7)
GE cash from operating
activities (GE CFOA) (a) $ 12.1 $ 14.7 $ 16.4
(a) GE sells customer receivables to GECS in part to fund the growth of our industrial
businesses. These transactions can result in cash generation or cash use. During
any given period, GE receives cash from the sale of receivables to GECS. It also
foregoes collection of cash on receivables sold. The incremental amount of cash
received from sale of receivables in excess of the cash GE would have otherwise
collected had those receivables not been sold, represents the cash generated or
used in the period relating to this activity. The incremental cash generated in GE
CFOA from selling these receivables to GECS increased GE CFOA by $0.9 billion in
2011, decreased GE CFOA by $0.4 billion in 2010 and increased GE CFOA by an
insignificant amount in 2009. See Note 27 for additional information about the
elimination of intercompany transactions between GE and GECS.
The most signifi cant source of cash in GE CFOA is customer-
related activities, the largest of which is collecting cash following
a product or services sale. GE operating cash collections
decreased by $4.6 billion in 2011 and decreased by $5.9 billion in
2010. These changes are consistent with the changes in compa-
rable GE operating segment revenues, including the impact of the
disposal of NBCU. Analyses of operating segment revenues dis-
cussed in the preceding Segment Operations section are the best
way of understanding their customer-related CFOA.
The most signifi cant operating use of cash is to pay our sup-
pliers, employees, tax authorities and others for a wide range of
material and services. GE operating cash payments decreased in
2011 and 2010 by $2.0 billion and $4.2 billion, respectively. These
changes are consistent with the changes in GE total costs and
expenses, including the impact of the disposal of NBCU.
Dividends from GECS represented the distribution of a por-
tion of GECS retained earnings and are distinct from cash from
continuing operating activities within the fi nancial services busi-
nesses. The amounts included in GE CFOA are the total dividends,
including normal dividends as well as any special dividends from
excess capital, primarily resulting from GECS business sales.
Beginning in the fi rst quarter of 2009, GECS suspended its normal
dividend to GE. There were no special dividends received from
GECS in 2011, 2010 or 2009.
GECS Cash Flow
GECS cash and equivalents were $76.7 billion at December 31,
2011, compared with $60.3 billion at December 31, 2010. GECS
cash from operating activities totaled $21.1 billion for 2011, com-
pared with cash from operating activities of $21.6 billion for the
same period of 2010. This was primarily due to increases, com-
pared to the prior year, in cash paid for income taxes of $0.7 billion
and decreases in accrued expenses of $1.4 billion, partially offset
by increases in net cash collateral held from counterparties on
derivative contracts of $1.2 billion.
Consistent with our plan to reduce GECS asset levels, cash
from investing activities was $29.2 billion in 2011, resulting from a
$14.4 billion reduction in fi nancing receivables due to collections
exceeding originations. We received proceeds of $11.6 billion
from sales of GE Capital’s Australian Home Lending operations
($4.6 billion), Consumer businesses in Mexico ($1.9 billion), Canada
($1.4 billion) and Singapore ($0.7 billion), Consumer RV Marine
($1.8 billion), our Real Estate Interpark business ($0.7 billion), our
CLL marine container leasing business ($0.4 billion) and our CLL
trailer fl eet services business in Mexico ($0.1 billion). Additionally,
we received proceeds of $4.4 billion from the sale of our equity
method investments in Garanti Bank ($3.8 billion) and Banco
Colpatria ($0.6 billion). These increases are partially offset by
an increase in equipment purchases, mainly at our GECAS and
CLL businesses.
GECS cash used for fi nancing activities in 2011 of $33.1 billion
related primarily to a $37.8 billion reduction in total borrowings,
consisting primarily of reductions in long-term borrowings and
commercial paper, partially offset by an increase in deposits at
our banks.
GECS pays dividends to GE through a distribution of its
retained earnings, including special dividends from proceeds of
certain business sales.