GE 2014 Annual Report Download - page 93

GE 2014 FORM 10-K 73
MD&A FINANCIAL RESOURCES AND LIQUIDITY
FINANCIAL RESOURCES AND LIQUIDITY
LIQUIDITY AND BORROWINGS
We maintain a strong focus on liquidity. At both GE and GECC we manage our liquidity to help provide access to sufficient
funding to meet our business needs and financial obligations throughout business cycles.
Our liquidity and borrowing plans for GE and GECC are established within the context of our annual financial and strategic
planning processes. At GE, our liquidity and funding plans take into account the liquidity necessary to fund our operating
commitments, which include primarily purchase obligations for inventory and equipment, payroll and general expenses
(including pension funding). We also take into account our capital allocation and growth objectives, including paying dividends,
repurchasing shares, investing in research and development and acquiring industrial businesses. At GE, we rely primarily on
cash generated through our operating activities, any dividend payments from GECC, and also have historically maintained a
commercial paper program that we regularly use to fund operations in the U.S., principally within fiscal quarters.
GECC’s liquidity position is targeted to meet its obligations under both normal and stressed conditions. GECC establishes a
funding plan annually that is based on the projected asset size and cash needs of the Company, which, over the past few
years, has incorporated our strategy to reduce our ending net investment in GE Capital. GECC relies on a diversified source of
funding, including the unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail
funding products, bank borrowings and securitizations to fund its balance sheet. We also rely on cash generated through
collection of principal, interest and other payments on our existing portfolio of loans and leases to fund its operating and
interest expense costs.
Our 2015 GECC funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current
portion of long-term debt ($38.0 billion at December 31, 2014), through issuance of long-term debt and reissuance of
commercial paper, cash on hand, dispositions, asset sales, and deposits and other alternative sources of funding. Long-term
maturities and early redemptions were $41.3 billion in 2014. Interest on borrowings is primarily repaid through interest earned
on existing financing receivables. During 2014, GECC earned interest income on financing receivables of $18.7 billion, which
more than offset interest and other financial charges of $8.4 billion.
We maintain a detailed liquidity policy for GECC that requires GECC to maintain a contingency funding plan. The liquidity
policy defines GECC’s liquidity risk tolerance under different stress scenarios based on its liquidity sources and also
establishes procedures to escalate potential issues. We actively monitor GECC’s access to funding markets and its liquidity
profile through tracking external indicators and testing various stress scenarios. The contingency funding plan provides a
framework for handling market disruptions and establishes escalation procedures in the event that such events or
circumstances arise.