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management’s discussion and analsis
62 GE 2012 ANNUAL REPORT
The most significant 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
increased by $11.8 billion in 2012 and decreased by $4.6 billion in
2011. These changes are consistent with the changes in compa-
rable GE operating segment revenues, including the impact of
acquisitions, primarily at Power & Water and Oil & Gas. Analyses
of operating segment revenues discussed in the preceding
Segment Operations section are the best way of understanding
our customer-related CFOA.
The most significant 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 increased by
$12.5 billion in 2012 and decreased by $2.0 billion in 2011. These
changes are consistent with the changes in GE total costs and
expenses, including the impact of acquisitions, primarily at Power
& Water and Oil & Gas.
Dividends from GECC, including special dividends, represent
the distribution of a portion of GECC retained earnings, and are
distinct from cash from continuing operating activities within the
financial services businesses. The amounts we show in GE CFOA
are the total dividends, including special dividends from excess
capital. Beginning in the second quarter of 2012, GECC restarted
its dividend to GE. During 2012, GECC paid dividends of $1.9 bil-
lion and special dividends of $4.5 billion to GE. There were no
dividends received from GECC in 2011 or 2010.
On October 9, 2012, GE issued $7.0 billion of notes impacting
our cash flows from financing activities. On February 1, 2013, we
repaid $5.0 billion of GE senior unsecured notes.
GECC Cash Flows
GECC cash and equivalents were $61.9 billion at December 31,
2012, compared with $76.7 billion at December 31, 2011. GECC
CFOA totaled $22.0 billion for 2012, compared with cash from
operating activities of $21.1 billion for the same period of 2011.
This was primarily due to increases, compared to the prior year, in
net cash collateral held from counterparties on derivative con-
tracts of $1.7 billion, partially offset by decreases in accounts
payable of $0.9 billion.
Consistent with our plan to reduce GECC asset levels, cash
from investing activities was $14.5 billion in 2012, primarily
resulting from a $5.4 billion reduction in financing receivables
due to collections (which includes sales) exceeding origina-
tions, $4.7 billion related to net loan repayments from our equity
method investments, proceeds from principal business disposi-
tions of $2.9 billion and $2.8 billion from sales of real estate held
for investment and equity method investments. These increases
were partially offset by $5.7 billion of net purchases of equipment
leased to others (ELTO).
GECC cash used for financing activities in 2012 of $52.5 billion
related primarily to a $49.5 billion reduction in total borrowings,
consisting primarily of net reductions in long-term borrowings
and commercial paper, $6.5 billion of dividends paid to shareown-
ers (including $0.1 billion paid to GECC preferred shareowners),
and $2.0 billion of redemptions of guaranteed investment con-
tracts at Trinity, partially offset by $4.0 billion of proceeds from
the issuance of preferred stock and $2.4 billion of higher deposits
at our banks.
GECC pays dividends to GE through a distribution of its
retained earnings, including special dividends from proceeds of
certain business sales.
Intercompany Eliminations
Effects of transactions between related companies are made on
an arms-length basis, are eliminated and consist primarily of
GECC dividends to GE; GE customer receivables sold to GECC;
GECC services for trade receivables management and material
procurement; buildings and equipment (including automobiles)
leased between GE and GECC; information technology and other
services sold to GECC by GE; aircraft engines manufactured by
GE that are installed on aircraft purchased by GECC from third-
party producers for lease to others; and various investments,
loans and allocations of GE corporate overhead costs. For further
information related to intercompany eliminations, see Note 27.