Exhibit 99(c)
-8-
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION OF OPERATIONS
OVERVIEW
General Electric Company's consolidated financial statements represent the
combination of manufacturing and nonfinancial services businesses of General
Electric Company (GE) and the accounts of General Electric Capital Services,
Inc. (GECS).
Management's Discussion of Operations is presented in three parts:
Consolidated Operations, Segment Operations and International Operations.
CONSOLIDATED OPERATIONS
General Electric Company achieved record earnings and cash generation in 2001,
demonstrating the benefits of its diverse business portfolio and continuing
emphasis on globalization, growth in services, Digitization and Six Sigma
Quality.
Revenues were $125.9 billion in 2001, a decrease of 3% from $129.9 billion
in 2000, reflecting a 6% increase in GE's industrial business revenues partially
offsetting a 12% decrease at GECS. As described on page 12, GECS revenues in
both years included the revenues of certain businesses significantly impacted by
strategic repositioning activities. Excluding such activities, consolidated
revenues increased 4%. Revenues in 2000 increased 16% from $111.6 billion in
1999, reflecting continued growth from global activities and services.
Earnings before accounting changes increased to a record $14,128 million in
2001, an 11% increase from $12,735 million in 2000. Per-share earnings before
accounting changes increased to $1.41 during 2001, up 11% from the prior year's
$1.27. (Except as otherwise noted, earnings per share are presented on a diluted
basis.) The cumulative effect of accounting changes related to the adoption, as
of January 1, 2001, of Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES, as amended, and the consensus of the FASB's Emerging
Issues Task Force on Issue 99-20, RECOGNITION OF INTEREST INCOME AND IMPAIRMENT
ON PURCHASED AND RETAINED BENEFICIAL INTERESTS IN SECURITIZED FINANCIAL ASSETS.
Adoption of these standards resulted in a one-time, non-cash reduction of
earnings of $444 million ($0.04 per share). After these required accounting
changes, 2001 earnings and earnings per share were $13,684 million and $1.37,
respectively. Earnings and earnings per share in 2000 rose 19% from $10,717
million and $1.07, respectively, in 1999.
MAJOR PROVISIONS OF NEW ACCOUNTING STANDARDS that may be significant to GE's
financial statements in the future are described in the following paragraphs.
SFAS 141, BUSINESS COMBINATIONS, and SFAS 142, GOODWILL AND OTHER
INTANGIBLE ASSETS, modify the accounting for business combinations, goodwill and
identifiable intangible assets. As of January 1, 2002, all goodwill and
indefinite-lived intangible assets must be tested for impairment and a
transition adjustment will be recognized. Management has not yet determined the
exact amount of goodwill impairment under these new standards, but believes the
non-cash transition charge to earnings will be approximately $1.0 billion ($0.10
per share) and recognized in the first quarter of 2002. Amortization of goodwill
will cease as of January 1, 2002, and, thereafter, all goodwill and any
indefinite-lived intangible assets must be tested at least annually for
impairment. The effect of the non-amortization provisions on 2002 operations
will be affected by 2002 acquisitions and cannot be forecast, but if these rules
had applied to goodwill in 2001, management believes that full-year 2001 net
earnings would have increased by approximately $1.1 billion ($0.11 per share).
SFAS 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS, requires recognition
of the fair value of obligations associated with the retirement of long-lived
assets when there is a legal obligation to incur such costs. This amount is
accounted for like an additional element of the corresponding asset's cost, and
is depreciated over that asset's useful life. SFAS 143 will be effective for GE
on January 1, 2003. Management has not yet determined the effect of adopting
this standard on GE's financial position and results of operations.
-9-
DIVIDENDS DECLARED in 2001 amounted to $6,555 million. Per-share dividends of
$0.66 were up 16% from 2000, following a 17% increase from the preceding year.
GE has rewarded its share owners with 26 consecutive years of dividend growth.
GE's dividend growth for the past five years has significantly outpaced dividend
growth of companies in the Standard & Poor's 500 stock index.
[GRAPH HERE]
- --------------------------------------------------------------------------------
GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1996
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
GE 12.84% 30.87% 53.49% 81.18% 109.66%
S&P 500 4.03 8.72 11.68 12.08 5.64
- --------------------------------------------------------------------------------
RETURN ON AVERAGE SHARE OWNERS' EQUITY was 27.1% (excluding the effect of
accounting changes) in 2001, about the same as in 2000. The 2000 return on
average share owners' equity improved from 26.8% in 1999.
Except as otherwise noted, the analysis in the remainder of this section
presents GE results with GECS reported on an equity basis.
GE TOTAL REVENUES were $74.0 billion in 2001, compared with $69.5 billion in
2000 and $60.9 billion in 1999.
o GE sales of goods and services were $68.0 billion in 2001, an increase of
7% from 2000, which in turn was 15% higher than in 1999. Volume was about
7% higher in 2001, reflecting strong double-digit increases at Power
Systems and Medical Systems, somewhat offset by decreases across most of
the short-cycle businesses, particularly NBC, Plastics and Specialty
-10-
Materials. While overall selling prices were essentially flat in 2001, the
effects of selling prices in various reporting segments differed markedly.
The net effect in 2001 of exchange rates on sales denominated in currencies
other than the U.S. dollar was slightly negative. Volume in 2000 was about
16% higher than in 1999, with selling price and currency effects both
slightly negative.
For purposes of the financial statement display of sales and costs of
sales on pages 2 and 3, "goods" is required by U.S. Securities and
Exchange Commission regulations to include all sales of tangible products,
and "services" must include all other sales, including broadcasting and
information services activities. GE sales of both spare parts (goods) and
repair services, referred to here by management as "product services
revenues," constitute an important part of operations. Sales of product
services were $18.8 billion in 2001, a 13% increase over 2000. Increases in
product services revenues in 2001 and 2000 were widespread, led by
continued strong growth at Power Systems, Medical Systems and
Transportation Systems. Operating margin from product services was
approximately $4.7 billion, up 17% from 2000 on a comparable basis. The
increase reflected improvements in most product services businesses and was
led by Power Systems and Medical Systems.
o GE other income, earned from a wide variety of sources, was $0.4 billion in
2001, $0.5 billion in 2000 and $0.9 billion in 1999. Other income in 1999
included a pre-tax gain of $0.4 billion resulting from the contribution of
certain of NBC's media properties to NBC Internet (NBCi), a former
publicly-traded company, in exchange for a noncontrolling interest in NBCi.
o Earnings of GECS before accounting changes were $5,586 million, up 8% in
2001, following a 17% increase the year before. See page 23 for an analysis
of these earnings.
PRINCIPAL COSTS AND EXPENSES for GE are those classified as costs of goods and
services sold, and selling, general and administrative expenses. Several GE
initiatives had significant effects on costs:
o The Six Sigma Quality initiative has lowered GE's costs by reducing rework,
simplifying processes and reducing direct material costs.
o Globalization has reduced costs through sourcing of products and services
in lower-cost countries.
o Digitization has also reduced costs by providing GE businesses the ability
to simplify and streamline processes, while investing in internal
infrastructure hardware and software, enabling them to conduct a growing
portion of their business over the Internet. Benefits from this initiative
include improved customer service, expanded product and service offerings
and increased operating efficiency for both GE and its customers.
-11-
Primarily because of the funding status of the GE Pension Plan and other retiree
benefit plans, principal U.S. postretirement benefit plans (the plans)
contributed $1,480 million, $1,266 million and $1,062 million to pre-tax
earnings (6.8%, 6.5% and 6.5% of earnings before accounting changes) in 2001,
2000 and 1999, respectively. See notes 5 and 6 for information about funding
status and actuarial assumptions of the plans. Postretirement benefit costs are
expected to increase in 2002 for a number of reasons, including reduction in the
assumed annual return on assets from 9.5% to 8.5%, reduction in the discount
rate from 7.5% to 7.25% and effects of increases in healthcare costs. In 2002,
management expects these plans to contribute approximately $700 million to
pre-tax earnings. This estimate will not affect the funding status of the GE
Pension Plan; management does not anticipate GE making contributions to that
Plan. The present funding status of the plans provides assurance of benefits for
GE plan participants, but future effects on operating results and funding depend
on economic conditions and investment performance.
Costs and expenses in 1999 included $326 million of unusual charges, the
largest of which resulted from liabilities associated with past activities at
former manufacturing sites that are not part of any current business segment,
and costs for rationalizing certain operations and facilities of the worldwide
industrial businesses. Major elements of the restructuring program included
costs for employee severance, lease termination, dismantlement and site
restoration. The program was essentially complete by the end of 2000.
[GRAPH HERE]
- --------------------------------------------------------------------------------
GE OPERATING MARGIN AS A PERCENTAGE OF SALES
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
As reported 11.0% 16.7% 17.3% 18.6% 19.6%
Restructuring and other
unusual charges 4.7 -- 0.5 0.3 --
- --------------------------------------------------------------------------------
OPERATING MARGIN is sales of goods and services less the costs of goods and
services sold, and selling, general and administrative expenses. GE operating
margin reached a record 19.6% of sales in 2001, up from a comparable 18.9% in
2000 and 17.8% in 1999. The continued improvement in operating margin in 2001
was led by Power Systems and Aircraft Engines, reflecting increasing benefits
from the Digitization, product services and Six Sigma Quality initiatives.
Reported operating margin was 18.6% in 2000, including the costs of a one-time
retirement benefit provision associated with the labor agreement concluded in
the third quarter of that year. Reported operating margin in 1999 was 17.3% of
sales, including the $326 million of unusual charges discussed in the preceding
paragraph.
TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar
basis) in 2001 was 2.2% as productivity in long-cycle businesses, particularly
Power Systems and Medical Systems, was partially offset by negative productivity
across several short-cycle businesses, particularly Plastics, reflecting volume
declines. In 2000, total cost productivity of 3.6% reflected benefits from
improvements in base cost productivity achieved through strong volume growth and
the Digitization and Six Sigma Quality initiatives.
GE INTEREST AND OTHER FINANCIAL CHARGES in 2001 amounted to $817 million, about
the same as 2000 and 1999. During 2001, the benefits of lower average interest
rates and lower average borrowing levels were partially offset by increased
provisions for interest on tax liabilities. During 2000, higher average interest
rates were more than offset by lower average borrowing levels.
INCOME TAXES on consolidated earnings before accounting changes were 28.3%,
compared with 31.0% in 2000 and 31.2% in 1999. A more detailed analysis of
differences between the U.S. federal statutory rate and the consolidated rate,
as well as other information about income tax provisions, is provided in note 7.
The effective tax rate of GECS decreased to 19.8% in 2001 from 26.9% in
2000 and 27.1% in 1999. The 2001 effective tax rate reflects the effects of
continuing globalization, certain transactions (see note 7), and the effect of a
pre-tax charge related to the events of September 11. The pre-tax charge related
to September 11 amounted to approximately $600 million, principally at
Insurance, and reduced the GECS effective tax rate by one percentage point.
Management expects that trends in GECS businesses, particularly the continuing
impact of globalization, are likely to result in an effective tax rate for GECS
in 2002 that will be lower than the 2000 and 1999 rates, but higher than the
2001 rate.
-12-
GECS businesses are categorized for management purposes into four operating
segments: Commercial Finance, Consumer Finance, Equipment Management
and Insurance.
GECS earnings before accounting changes were $5,586 million in 2001, up 8%
from $5,192 million in 2000, with strong double-digit earnings growth in the
Consumer Finance and Commercial Finance segments. Net earnings in 2000 increased
17% from 1999. Earnings growth throughout the three-year period resulted from
origination volume and asset growth, productivity and acquisitions of businesses
and portfolios. Principal factors in the 2001 increase were strong productivity
($0.7 billion) and lower taxes ($0.5 billion) partially offset by GE Global
Insurance Holdings ($0.5 billion) and lower realized gains on financial
instruments. Excluding effects of Paine Webber Group, Inc. (PaineWebber) in 2000
and Americom in 2001, both of which are discussed below, such pre-tax gains were
lower in 2001 by $0.5 billion ($0.3 billion after tax). Pre-tax gains on sales
of investment securities declined in 2001 by $0.5 billion, of which $0.4 billion
related to GE Equity; other GE Equity gains were $0.8 billion lower; while gains
on securitizations were up $0.8 billion from 2000.
On November 9, 2001, GECS exchanged the stock of Americom and other related
assets and liabilities for a combination of cash and stock in SES Global, a
leading satellite company. The transaction resulted in a gain of $1,158 million
($642 million after tax).
On December 28, 2000, Montgomery Ward, LLC (Wards), formerly a GECS
subsidiary, filed for bankruptcy protection and began liquidation proceedings.
Net earnings for the year 2000 included operating losses from Wards amounting to
$245 million as well as a charge, primarily to other costs and expenses, for
$815 million ($537 million after tax) to recognize additional associated losses.
o GECS TOTAL REVENUES decreased 12% to $58.4 billion in 2001, following
a 19% increase to $66.2 billion in 2000. The three principal reasons
for the decrease in revenues in 2001 compared with 2000 were: the
deconsolidation of Wards and resulting absence of sales in 2001 ($3.2
billion); the effects of rationalization of operations and market
conditions at IT Solutions ($2.9 billion); and reduced surrender fees
compared with 2000 ($1.2 billion) associated with the planned run-off
of restructured insurance policies of Toho Mutual Life Insurance
Company (Toho) at GE Financial Assurance (GEFA). The increase in 2000
reflected post-acquisition revenues from acquired businesses ($6.5
billion) as well as volume growth ($2.5 billion). Revenues in 2000
also included the gain from sale of common stock of PaineWebber ($1.4
billion). Additional information about other revenue items is provided
in the analysis of GECS operating segments beginning on page 14.
o GECS COST OF GOODS SOLD declined to $3.3 billion in 2001, compared
with $8.5 billion in 2000 and $8.0 billion in 1999, reflecting volume
declines at IT Solutions and the deconsolidation of Wards on December
28, 2000, when Wards commenced liquidation proceedings. The increase
in 2000 primarily reflected the consolidation of Wards from August 2,
1999, through December 28, 2000.
o GECS INTEREST EXPENSE on borrowings in 2001 was $10.6 billion,
compared with $11.1 billion in 2000 and $9.4 billion in 1999. The
change in both years reflected the effects of both interest rates and
the average level of borrowings used to finance asset growth. GECS
average composite effective interest rate was 5.11% in 2001, compared
with 5.89% in 2000 and 5.14% in 1999. In 2001, average assets of
$386.6 billion were 7% higher than in 2000, which in turn were 13%
higher than in 1999. See page 32 for a discussion of interest rate
risk management.
o GECS INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased
to $15.1 billion in 2001, compared with $14.4 billion in 2000 and
$11.0 billion in 1999. This increase reflected effects of growth in
premium volume and business acquisitions at GEFA throughout the
period, and costs discussed in the analysis of the Insurance and
All Other GECS segments, partially offset by the planned run-off
of restructured insurance policies at Toho.
-13-
[GRAPH HERE]
- --------------------------------------------------------------------------------
GECS EARNINGS BEFORE ACCOUNTING CHANGES
(In billions)
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
$3.26 $3.80 $4.44 $5.19 $5.59
- --------------------------------------------------------------------------------
o GECS PROVISION FOR LOSSES ON FINANCING RECEIVABLES was $2.5 billion in
2001, compared with $2.0 billion in 2000 and $1.7 billion in 1999.
These provisions principally related to private-label credit cards,
bank credit cards, personal loans and auto loans and leases as well as
commercial, industrial, and equipment loans and leases, all of which
are discussed on page 26 under Portfolio Quality. The provisions
throughout the three-year period reflected higher average receivable
balances, changes in the mix of business, and the effects of
delinquency rates--higher during 2001 and lower during
2000--consistent with industry experience.
o GECS other costs and expenses were $19.8 billion, $22.8 billion and
$19.4 billion in 2001, 2000 and 1999, respectively. Changes over the
three-year period were largely the result of acquisitions and unusual
charges, which were more than offset in 2001 by productivity at
Consumer Finance and Equipment Management. Costs and expenses in 2001
included $0.5 billion of costs in businesses that were acquired after
January 1, 2001, as well as $0.3 billion of costs discussed in the
analysis of All Other GECS. Similarly, 2000 included $2.5 billion of
costs in businesses that were acquired after January 1, 2000; charges
for costs associated with Wards amounting to $0.8 billion, as
discussed previously; and $0.5 billion of costs to rationalize certain
operations discussed in the analysis of All Other GECS.
o Over the last three years, market interest rates have been more
volatile than GECS average composite effective interest rates,
principally because of the mix of effectively fixed-rate borrowings in
the GECS financing structure. GECS portfolio of fixed and
floating-rate financial products has behaved similarly over that
period. Consequently, financing spreads have remained relatively flat
over the three-year period.
-14-
SEGMENT OPERATIONS
Revenues and segment profit for operating segments are shown on page 18. For
additional information, including a description of the products and services
included in each segment, see note 27.
AIRCRAFT ENGINES reported a 6% increase in revenues in 2001, reflecting higher
volume in services, and sales of commercial engines and aero-derivative
products. Operating profit was 7% higher primarily as a result of volume growth
and productivity. Product services revenues following the events of September 11
have been adversely affected by reduced customer flight hours and servicing
requirements. Operating profit in 2000 increased 15% on revenues that were
slightly higher than in 1999. The improvement in operating profit reflected
strong productivity.
In 2001, revenues from sales to the U.S. government were $1.9 billion
compared with $1.6 billion in 2000.
Aircraft Engines received orders of $12.1 billion in 2001 compared with
$13.5 billion in 2000. The $11.2 billion total backlog at year-end 2001
comprised unfilled product orders of $9.4 billion (of which 56% was scheduled
for delivery in 2002) and product services orders of $1.8 billion scheduled for
2002 delivery. Comparable December 31, 2000, total backlog was $12.0 billion.
Management believes the events of September 11 will continue to adversely affect
the airline industry in 2002 with implications for existing backlog, engine
servicing revenue and future new engine orders.
COMMERCIAL FINANCE
- -------------------------------------------------------------------------
(In millions) 2001 2000 1999
- -------------------------------------------------------------------------
REVENUES
Commercial Equipment Financing $ 4,535 $ 3,634 $ 3,195
Real Estate 1,919 1,977 1,582
Aviation Services (GECAS) 2,173 1,962 1,551
Structured Finance Group 1,093 999 812
Commercial Finance 1,786 1,617 1,310
Vendor Financial Services 2,095 1,792 1,372
Other Commercial Finance 279 1 --
-----------------------------
Total revenues $ 13,880 $11,982 $ 9,822
=============================
NET EARNINGS (a)
Commercial Equipment Financing $ 642 $ 537 $ 429
Real Estate 489 374 303
Aviation Services (GECAS) 475 479 284
Structured Finance Group 386 344 270
Commercial Finance 368 290 239
Vendor Financial Services 320 274 236
Other Commercial Finance 44 (4) (3)
------------------------------
Net earnings $ 2,724 $ 2,294 $ 1,758
========================================================================
(a) Charges of $85 million in 2001 were not allocated to this segment, pursuant
to Statement of Financial Accounting Standard (SFAS) No. 131, because
management did not include these costs in measuring the performance of
businesses in this segment for internal purposes. Such charges, included in
All Other GECS, related to restructuring various global operations and to
provisions for disposition of assets.
COMMERCIAL FINANCE revenues increased 16% in 2001, following a 22% increase
in 2000. The 2001 increase resulted from acquisition and volume growth at
Commercial Equipment Financing, Vendor Financial Services, GECAS and Commercial
Finance, including the acquisition of Heller Financial on October 24, 2001
(included in Other Commercial Finance), volume growth at Structured Finance
Group and increased gains on securitizations of financial assets. The increase
in revenues in 2000 primarily reflected asset growth from originations across
all major businesses. Net earnings increased 19% in 2001 and 30% in 2000. The
2001 increase reflected securitization gains, asset growth from acquisitions at
Commercial Equipment Financing, Commercial Finance and Vendor Financial
Services, origination growth at Structured Finance Group, and higher asset gains
and productivity at Real Estate. In 2000, the increase in net earnings resulted
from asset growth from originations and favorable tax effects.
-15-
CONSUMER FINANCE
- -----------------------------------------------------------------------------
(In millions) 2001 2000 1999
- -----------------------------------------------------------------------------
REVENUES
Global Consumer Finance $ 5,561 $ 5,430 $ 5,084
GE Card Services 3,947 3,891 2,478
Other Consumer Finance -- (1) --
-----------------------------
Total revenues $ 9,508 $ 9,320 $ 7,562
=============================
NET EARNINGS (a)
Global Consumer Finance $ 1,039 $ 856 $ 716
GE Card Services 669 520 203
Other Consumer Finance (6) -- 1
-----------------------------
Net earnings $ 1,702 $ 1,376 $ 920
=============================================================================
(a) Charges of $57 million in 2001 were not allocated to this segment,
pursuant to SFAS 131, because management did not include these costs in
measuring the performance of businesses in this segment for internal
purposes. Such charges, included in All Other GECS, related to
unprofitable financing product lines that are being exited.
CONSUMER FINANCE revenues increased 2% in 2001, following a 23% increase
in 2000. Overall, the revenue performance in both years reflected the
post-acquisition revenues from acquired businesses, which was more significant
in 2000, and volume growth. Net earnings increased 24% in 2001 and 50% in 2000.
The 2001 increase reflected productivity at Global Consumer Finance and volume
growth at GE Card Services. The increase in net earnings in 2000 resulted from
acquisition and volume growth at GE Card Services and Global Consumer Finance.
-16-
CONSUMER PRODUCTS
- --------------------------------------------------------------------------------
(In millions) 2001 2000 1999
- --------------------------------------------------------------------------------
REVENUES
Appliances $ 5,810 $ 5,887 $ 5,671
Lighting 2,625 2,830 2,854
----------------------------------------
Total revenues $ 8,435 $ 8,717 $ 8,525
========================================
OPERATING PROFIT
Appliances $ 406 $ 439 $ 446
Lighting 242 440 525
----------------------------------------
Total operating profit $ 648 $ 879 $ 971
================================================================================
CONSUMER PRODUCTS revenues were 3% lower than a year ago, as continued
price erosion at Appliances and Lighting offset modest market share gains at
Appliances. Operating profit decreased by 26%, largely as a result of lower
selling prices at Appliances and Lighting and increased program spending on new
products at Appliances. Revenues in 2000 were 2% higher than in 1999, as volume
increases more than offset lower selling prices at Appliances. Operating profit
decreased 9% in 2000, largely as a result of lower prices and productivity at
Lighting.
EQUIPMENT MANAGEMENT
- -----------------------------------------------------------------------------
(In millions) 2001 2000 1999
- -----------------------------------------------------------------------------
REVENUES
Equipment Management revenues $ 4,401 $ 4,969 $ 4,789
=============================
NET EARNINGS (a)
Equipment Management net earnings $ 359 $ 465 $ 422
==============================================================================
(a) Charges of $17 million in 2001 were not allocated to this segment,
pursuant to SFAS 131, because management did not include these costs in
measuring the performance of businesses in this segment for internal
purposes. Such charges, included in All Other GECS, related to the
restructuring of various global operations.
EQUIPMENT MANAGEMENT revenues decreased 11% in 2001 following a 4%
increase in 2000. The 2001 decrease resulted primarily from lower volume across
all of the businesses, primarily driven by lower utilization rates, and the 2000
increase was primarily attributable to higher revenues at Transport
International Pool/Modular Space associated with volume growth and higher
utilization rates. Net earnings decreased 23% in 2001, following a 10% increase
in 2000. The 2001 decrease primarily reflected asset write-downs at Transport
International Pool/Modular Space and European Equipment Management, and lower
utilization rates at Railcar, partially offset by tax benefits from a
restructuring at Penske. The increase in 2000 principally related to
productivity and increased gains at Transport International Pool/Modular Space.
-17-
INDUSTRIAL PRODUCTS AND SYSTEMS
- --------------------------------------------------------------------------------
(In millions) 2001 2000 1999
- --------------------------------------------------------------------------------
REVENUES
Industrial Systems $ 4,440 $ 4,469 $ 4,333
Transportation Systems 2,355 2,263 2,358
GE Supply 2,302 2,159 1,951
----------------------------------------
Total revenues $ 9,097 $ 8,891 $ 8,642
========================================
OPERATING PROFIT
Industrial Systems $ 527 $ 596 $ 548
Transportation Systems 400 436 437
GE Supply 99 80 63
----------------------------------------
Total operating profit $ 1,026 $ 1,112 $ 1,048
================================================================================
INDUSTRIAL PRODUCTS AND SYSTEMS revenues in 2001 were 2% higher than in
2000, as higher product services revenues at Transportation Systems, including
acquisitions, more than offset selling price decreases across the segment and
lower volume at Industrial Systems. Operating profit decreased 8% primarily as a
result of the decline in selling prices and cost inflation. Revenues rose 3% in
2000, largely as a result of volume increases at Industrial Systems and growth
in product services, including acquisitions, which more than offset lower
selling prices. Operating profit increased 6% in 2000, primarily reflecting
productivity and growth in product services.
Transportation Systems received orders of $2.6 billion in 2001, compared
with $2.1 billion in 2000. The $1.7 billion total backlog at year-end 2001
comprised unfilled product orders of $1.2 billion (of which 51% was scheduled
for delivery in 2002) and product services orders of $0.5 billion scheduled for
2002 delivery. Comparable December 31, 2000, total backlog was $1.4 billion.
-18-
SUMMARY OF OPERATING SEGMENTS
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
-------------------------------------------------------------
For the years ended December 31 (In millions) 2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
REVENUES
Segments
Aircraft Engines $ 11,389 $ 10,779 $ 10,730 $ 10,294 $ 7,799
Commercial Finance 13,880 11,982 9,822 8,072 6,685
Consumer Finance 9,508 9,320 7,562 6,750 6,032
Consumer Products 8,435 8,717 8,525 8,520 8,763
Equipment Management 4,401 4,969 4,789 4,234 3,982
Industrial Products and Systems 9,097 8,891 8,642 8,305 7,912
Insurance 23,890 24,766 19,433 16,841 14,477
Materials 7,069 8,020 7,118 6,796 6,934
NBC 5,769 6,797 5,790 5,269 5,153
Power Systems 20,211 14,861 10,099 8,500 7,986
Technical Products and Services 9,011 7,915 6,863 5,323 4,861
All Other GECS 6,674 15,140 14,143 12,797 8,755
Eliminations and corporate items (a) (3,421) (2,304) (1,886) (1,232) 1,501
--------- --------- --------- --------- --------
Consolidated revenues $ 125,913 $ 129,853 $ 111,630 $ 100,469 $ 90,840
========= ========= ========= ========= ========
EARNINGS
Segment profit
Aircraft Engines $ 2,147 $ 2,000 $ 1,739 $ 1,478 $ 1,117
Commercial Finance 2,724 2,294 1,758 1,492 1,198
Consumer Finance 1,702 1,376 920 631 667
Consumer Products 648 879 971 1,103 1,152
Equipment Management 359 465 422 476 420
Industrial Products and Systems 1,026 1,112 1,048 874 765
Insurance 1,334 1,642 1,730 1,459 1,235
Materials 1,433 1,865 1,590 1,536 1,533
NBC 1,408 1,609 1,427 1,225 1,129
Power Systems 4,860 2,523 1,537 1,118 1,082
Technical Products and Services 1,623 1,435 1,232 957 856
All Other GECS 19 35 125 146 17
--------- --------- --------- --------- --------
Total segment profit 19,283 17,235 14,499 12,495 11,171
GECS goodwill amortization (552) (620) (512) (408) (281)
GE corporate items and eliminations (b) (c) 407 730 747 909 (80)
GE interest and other financial charges (817) (811) (810) (883) (797)
GE provision for income taxes (4,193) (3,799) (3,207) (2,817) (1,810)
--------- --------- --------- --------- --------
Earnings before accounting changes 14,128 12,735 10,717 9,296 8,203
--------- --------- --------- --------- --------
Cumulative effect of accounting changes (444) -- -- -- --
--------- --------- --------- --------- --------
Net earnings $ 13,684 $ 12,735 $ 10,717 $ 9,296 $ 8,203
========= ========= ========= ========= ========
-19-
The notes to consolidated financial statements on pages 44-87 are an integral
part of this statement. Segment profit excludes any goodwill amortization and
accounting changes. Segment profit includes or excludes interest and other
financial charges and segment income taxes according to how segment management
is measured - excluded for Aircraft Engines, Consumer Products, Industrial
Products and Systems, Materials, NBC, Power Systems and Technical Products and
Services, but included for Commercial Finance, Consumer Finance, Equipment
Management, Insurance and All Other GECS.
(a) Includes revenues of $944 million in 1997 from an appliance distribution
affiliate that was deconsolidated in 1998. Also includes $1,538 million
gain in 1997 from an exchange of preferred stock in Lockheed Martin
Corporation for the stock of a newly formed subsidiary.
(b) Includes pension income and goodwill amortization. Also includes income,
principally from licensing activities, of $88 million, $79 million, $62
million, $271 million and $310 million in 2001, 2000, 1999, 1998 and 1997,
respectively.
(c) 1999 includes unusual charges amounting to $265 million. Of the total,
amounts that relate to activities of GE operating segments were as follows:
Aircraft Engines--$42 million, Consumer Products--$80 million, Industrial
Products and Systems--$7 million, Materials--$13 million and Technical
Products and Services--$34 million. 1997 includes unusual charges of $2,322
million. Of the total, amounts that relate to activities of GE operating
segments were as follows: Aircraft Engines--$342 million, Consumer
Products--$412 million, Industrial Products and Systems--$270 million,
Materials--$63 million, NBC--$161 million, Power Systems--$437 million and
Technical Products and Services--$157 million. Also included in 1997 is a
$1,538 million gain associated with the Lockheed Martin Corporation
transaction described in (a) above.
-20-
INSURANCE
(In millions) 2001 2000 1999
-------- ------- -------
REVENUES
GE Financial Assurance $ 12,826 $12,888 $ 8,790
Mortgage Insurance 1,075 973 936
GE Global Insurance Holdings 9,453 10,223 9,013
Other GE Insurance 536 682 694
-------- ------- -------
Total revenues $ 23,890 $24,766 $19,433
======== ======= =======
NET EARNINGS (a)
GE Financial Assurance $ 726 $ 672 $ 485
Mortgage Insurance 407 356 346
GE Global Insurance Holdings 32 505 690
Other GE Insurance 169 109 209
-------- ------- -------
Net earnings $ 1,334 $ 1,642 $ 1,730
======== ======= =======
(a) Charges of $306 million in 2001 were not allocated to this segment,
pursuant to SFAS 131, because management did not include these costs in
measuring the performance of businesses in this segment for internal
purposes. Such charges, included in All Other GECS, related to
unprofitable insurance product lines being exited and to provisions for
disposition of nonstrategic investments.
INSURANCE revenues decreased 4% in 2001, following a 27% increase in 2000.
The 2001 decrease was the result of reduced net premiums earned at GE Global
Insurance Holdings (the parent of Employers Reinsurance Corporation), reflecting
the events of September 11 as discussed below, decreased investment income at GE
Global Insurance Holdings, and decreased surrender fee income at GE Financial
Assurance associated with the planned run-off of restructured insurance policies
at Toho. These factors were partially offset by increased premium income
associated with origination volume at GE Global Insurance Holdings, and
post-acquisition revenues from acquisition growth and volume growth at GE
Financial Assurance. The increase in revenues in 2000 resulted from post
acquisition revenues from acquired businesses and volume growth at GE Financial
Assurance, and premium growth and increased investment income, as higher
interest income more than offset a decrease in net realized investment gains at
GE Global Insurance Holdings. Net pre-tax realized investment gains in the
marketable equity and debt securities portfolios amounted to $970 million, $817
million and $890 million in 2001, 2000 and 1999, respectively. Remaining
available gains in the portfolios at December 31, 2001, amounted to $1,796
million before tax.
Net earnings decreased 19% and 5% in 2001 and 2000, respectively,
reflecting GE Global Insurance Holdings underwriting results, which were
partially offset by productivity at GE Financial Assurance in 2001 and
acquisition and volume growth at GE Financial Assurance in 2000. Net earnings in
2001 at GE Global Insurance Holdings were adversely affected by approximately
$575 million ($386 million after tax) related to the insurance losses arising
from the events of September 11. This amount primarily resulted from contingent
premium payment provisions contained in certain retrocession agreements. After
these particular losses, total losses exceeded retrocession policy limits in
place at GE Global Insurance Holdings. Substantially all of the September 11
losses are recoverable from retrocessionaires under reinsurance policies that
require additional premiums to those retrocessionaires. Therefore, the 2001
Statement of Earnings reflects $698 million reduction in net premiums earned and
$78 million of increased losses, partially offset by $201 million in lower
insurance acquisition costs. Historical experience related to large catastrophic
events has shown that a broad range of total insurance industry loss estimates
often exists following such an event and it is not unusual for there to be
significant subsequent revisions in such estimates. Management's best estimate
of its existing net liability based on the information currently available is
$575 million, net of estimated recoveries under retrocession arrangements, under
which a portion of losses is routinely ceded to other reinsurance entities.
Substantially all of GECS retrocessionaires are large, highly rated reinsurance
entities. At this time, management does not anticipate that any significant
portion of its estimated recoveries will be uncollectible.
-21-
[GRAPH HERE]
- --------------------------------------------------------------------------------
CONSOLIDATED INTERNATIONAL REVENUES BY REGION
(In billions)
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
Europe $20.63 $24.35 $25.82 $26.67 $26.29
Pacific Basin 7.98 8.06 10.19 15.19 13.30
Americas 6.20 6.91 6.73 7.68 7.89
Other 3.43 3.19 2.94 3.41 3.96
- --------------------------------------------------------------------------------
Net earnings in 2001 and 2000 were also adversely affected by the continued
deterioration of underwriting results at GE Global Insurance Holdings,
reflecting higher property and casualty-related losses (principally as a result
of adverse development relating to prior-year loss events) and the continued
effects of low premiums in the property and casualty insurance/reinsurance
industry. GE Global Insurance Holdings underwriting results in 2001 and 2000
tracked performance in the global property and casualty industry. As these
results were realized, management began increasing premiums for given levels of
coverage, and reevaluated product lines, policies, contracts and specific
customers. Businesses that, following this reevaluation, were deemed to offer
reasonable returns were retained and, in some cases, expanded. On the other
hand, activities were curtailed in businesses with unsatisfactory risk/return
profiles.
The majority of the adverse development at GE Global Insurance Holdings in
2001, and to a lesser extent in 2000, related to higher projected ultimate
losses for liability coverages, especially in the hospital liability,
nonstandard automobile (automobile insurance extended to higher-risk drivers)
and commercial and public entity general liability lines of business. The
increase in 2000 also reflected an increase in industry-wide loss estimates
related to certain large property loss events, with the largest impact resulting
from the European windstorms of December 1999. The adverse development of GE
Global Insurance Holdings for both years was partially mitigated by favorable
experience in the Mortgage Insurance business, which resulted from favorable
economic conditions, improvement in certain real estate markets and loss
mitigation efforts.
MATERIALS
- ----------------------------------------------------
(In millions) 2001 2000 1999
- ----------------------------------------------------
REVENUES
Plastics $ 5,252 $ 6,013 $ 5,315
Specialty Materials 1,817 2,007 1,803
---------------------------
Total revenues $ 7,069 $ 8,020 $ 7,118
===========================
OPERATING PROFIT
Plastics $ 1,166 $ 1,518 $ 1,297
Specialty Materials 267 347 293
----------------------------
Total operating profit $ 1,433 $ 1,865 $ 1,590
====================================================
MATERIALS revenues were 12% lower than in 2000, reflecting increased pricing
pressures and lower volume at both Plastics and Specialty Materials. Plastics
experienced continued softness in the automotive, optical media,
telecommunication and business equipment markets while Specialty Materials was
adversely affected by lower sales in the semiconductor market. Operating profit
was 23% lower, primarily as a result of lower pricing and volume, and negative
base cost productivity at both Plastics and Specialty Materials. Operating
profit in 2000 increased 17% on revenues that were 13% higher than in 1999. The
increases in both revenues and operating profit were primarily attributable to
higher volume and improved selling prices at both Plastics and Specialty
Materials, which more than offset the effects of higher raw material prices.
[GRAPH HERE]
- --------------------------------------------------------------------------------
GE ORDERS BACKLOG
(In billions)
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
$26.44 $28.53 $32.42 $44.17 $47.43
- --------------------------------------------------------------------------------
-22-
NBC revenues declined 15% from the record-high levels of 2000 which were 17%
higher than in 1999. Revenues in 2001 were negatively affected by a significant
decline in advertising volume and pricing, as well as lost revenue related to
coverage of the events of September 11. Revenues in 2000 benefited from
broadcast of the 2000 Summer Olympic Games as well as strong growth in cable
operations, particularly at CNBC. Operating profit decreased 12% in 2001
reflecting adverse advertising market conditions, events of September 11, and
charges resulting from dissolving the XFL, which more than offset savings from
cost reduction actions. Operating profit increased 13% in 2000 as growth in
owned-and-operated stations, cable operations and network operations was
partially offset by higher license fees associated with the renewal of certain
sports and prime-time programs.
POWER SYSTEMS operating results throughout the last three years reflected the
sharp increase in U.S. gas turbine sales of market leading "F" technology,
higher prices for those turbines and base cost productivity associated with
their manufacture. Secondarily, and with a longer-lasting effect, the portfolio
of long-term product services agreements associated with new unit sales has
generated favorable operating results. Aero-derivative units revenues also
benefited from increased demand in the power generation sector throughout this
period. Reflecting these conditions, revenues increased 36% in 2001, following
an increase of 47% in 2000. Similarly, operating profit increased 93% in 2001,
following an increase of 64% in 2000.
Power Systems orders were $24.5 billion in 2001, a 4% increase over 2000,
reflecting continued strength of the power generation business and renewed
growth in the oil and gas industry. The $28.9 billion total backlog at year-end
2001 comprised unfilled product orders of $24.1 billion (of which 75% was
scheduled for delivery in 2002) and product services orders of $4.7 billion
scheduled for 2002 delivery. Comparable December 31, 2000, total backlog was
$25.1 billion. As a result of softening demand for electric power in the U.S.
market, management is in discussions with certain customers regarding their
equipment requirements. These discussions may result in changes to contractual
agreements, including delays or cancellations. In the event of order
cancellation, contractual terms require customers to pay termination fees. In
all cases, such fees are expected to cover Power Systems' investment in the
contracts and at least a portion has generally been received as progress
collections. At least partial recovery of lost profits would also be expected.
TECHNICAL PRODUCTS AND SERVICES
- ----------------------------------------------------
(In millions) 2001 2000 1999
---------------------------
REVENUES
Medical Systems $ 8,409 $ 7,275 $ 6,171
Global eXchange Services 602 640 692
---------------------------
Total revenues $ 9,011 $ 7,915 $ 6,863
===========================
OPERATING PROFIT
Medical Systems $ 1,498 $ 1,321 $ 1,107
Global eXchange Services 125 114 125
---------------------------
Total operating profit 1,623 1,435 1,232
====================================================
TECHNICAL PRODUCTS AND SERVICES revenues rose 14% in 2001, primarily as a
result of sharply higher volume at Medical Systems. Sales by businesses acquired
during the last two years accounted for 5% of Medical Systems 2001 revenues.
Operating profit grew 13%, largely as a result of productivity and volume growth
as well as higher realized gains, principally the result of disposition in 2001
of a joint venture at Global eXchange Services. Revenues in 2000 were 15% higher
than 1999 on sharply higher volume at Medical Systems. Operating profit
increased 16% in 2000, largely as a result of productivity and volume increases
at Medical Systems, which more than offset lower selling prices across the
segment.
-23-
Orders received by Medical Systems in 2001 were $8.9 billion, a 17%
increase over 2000. The $4.1 billion total backlog at year-end 2001 comprised
unfilled product orders of $2.7 billion (of which 68% was scheduled for delivery
in 2002) and product services orders of $1.4 billion scheduled for 2002
delivery. Comparable December 31, 2000, total backlog was $3.6 billion.
[GRAPH HERE]
- --------------------------------------------------------------------------------
GECS REVENUES
(In billions)
1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
$39.93 $48.70 $55.75 $66.18 $58.35
- --------------------------------------------------------------------------------
-24-
ALL OTHER GECS
- ------------------------------------------------------------------------------
(In millions) 2001 2000 1999
- ------------------------------------------------------------------------------
REVENUES
Wards $ -- $ 3,234 $ 1,622
IT Solutions 4,180 7,072 8,381
GE Equity (126) 1,079 863
Americom 540 594 463
Americom gain 1,158 -- --
PaineWebber gain -- 1,366 --
Asset impairments (383) (238) --
Product line exits (53) -- --
Other 1,358 2,033 2,814
-----------------------------
Total revenues $ 6,674 $15,140 $14,143
=============================
NET EARNINGS
Wards
Operating losses $ -- $ (245) $ (26)
Losses from Ward's bankruptcy (22) (537) --
IT Solutions 47 (152) (20)
GE Equity (270) 525 416
Americom 256 197 152
Americom gain 642 -- --
PaineWebber gain -- 848 --
Asset impairments (310) (49) --
Product line exits (180) -- --
Restructuring (144) (298) --
Other -- (254) (397)
------------------------------
Net earnings $ 19 $ 35 $ 125
==============================================================================
ALL OTHER GECS includes GECS activities and businesses that management has
chosen not to allocate to one of the four GECS segments.
In addition to comments on GECS All Other elsewhere in this report, the
following comments relate to the table above:
o IT SOLUTIONS (ITS) -- During 2000 and 2001, in response to intense
competition and transition of the computer equipment market to a
direct distribution model, ITS exited its underperforming operations
in the United Kingdom, France, Brazil and Mexico and significantly
reduced its reseller role in the United States. Costs for involuntary
termination benefits, asset impairments, facilities exit costs and
losses on sales of portions of the business amounted to $45 million
($43 million after-tax) and $246 million ($191 million after-tax) in
2001 and 2000, respectively and are included in restructuring in the
table above. The number of employees was reduced from a 2000 peak of
11,000 to 7,500 at the end of 2001.
o GE EQUITY -- GE Equity manages equity investments in early-stage,
early growth, pre-IPO companies. GE Equity revenues include income,
gains and losses on such investments. During 2001, losses on GE
Equity's investments exceeded gains and other investment income,
resulting in negative revenues. Net earnings in 2001 included a $270
million net loss at GE Equity, which increased over the prior year
principally from reduced asset gains.
o AMERICOM - On November 9, 2001, GECS exchanged its satellite
operations, comprising the stock of Americom and other related assets
and liabilities, for a combination of cash and 31% of the
publicly-traded stock of SES Global, a leading satellite company, in
order to create the world's largest satellite services provider. The
transaction resulted in a gain of $1,158 million ($642 million after
tax), representing the difference between the carrying value of the
69% investment in Americom and the amount of cash plus the market
value of SES Global shares received at the closing date. No gain was
recorded on the 31% interest in Americom that was indirectly retained
by GECS. GECS investment in SES Global is accounted for on the equity
method.
-25-
o 2001 -- ASSET IMPAIRMENTS AND PRODUCT LINE EXITS - Operations included
$656 million of charges related to disposing of and providing for
disposition of several nonstrategic investments and other assets, to
certain unprofitable insurance and financing product lines that are
being exited, and to restructuring various global operations. These
costs, not allocated to the related businesses as management did not
include these costs in measuring the performance of those businesses
for internal purposes, included $478 million ($310 million after tax)
for other-than-temporary impairments of investments, the largest of
which were held by GE Financial Assurance, GE Equity and GE Global
Insurance Holdings. These losses, $383 million of which were charged
to revenues, included $130 million ($84 million after tax) of losses
on Enron bonds; such bonds were written down to a cost basis of $32
million at December 31, 2001. These losses also included investment
impairment charges of $199 million ($130 million after tax) on
non-U.S. mutual funds and the technology sector.
In response to escalating losses, management decided to cease further
underwriting and exit certain insurance and financing product lines.
Charges associated with such loss events and the resulting exits
totaled $180 million after tax, of which $149 million related to the
loss events in GE Global Insurance Holdings product lines, primarily
nonstandard automobile and higher limit industrial property insurance
coverages, and the remaining $31 million related to the exit of the
Consumer Direct business by GE Card Services.
Restructuring of several GECS global businesses included consolidation
of several European Equipment Management businesses and
rationalization of certain European Equipment Management businesses.
Costs related to the exit of these activities amounted to $144 million
after tax and consisted of involuntary termination benefits,
facilities exit costs, and asset impairments.
o 2000 -- LOSSES FROM WARD'S BANKRUPTCY, ASSET IMPAIRMENTS AND
RESTRUCTURINGS -- Net earnings included charges of $537 million
related to the Ward's bankruptcy and strategic rationalization costs
of $347 million related to IT Solutions, Mortgage Services, GE Equity
and Auto Financial Services (AFS), primarily for asset write-downs,
employee severance and lease terminations, which were not allocated to
those businesses because management did not include these costs in
measuring the performance of those businesses for internal purposes.
o OTHER -- Other includes GECS corporate function expenses, liquidating
businesses and other non-segment aligned operations, the most
significant of which were AFS, Mortgage Services, and the GE Auto and
Home business. The decrease in revenues in both years arose from AFS
and Mortgage Services, as both operations stopped accepting new
business in 2000. Corporate function expenses decreased in 2000 and
2001, but liquidating operations at AFS and Mortgage Services incurred
higher losses in 2000, offsetting some of the expense reduction.
-59-
10 GE CURRENT RECEIVABLES
December 31 (In millions) 2001 2000
-------- --------
Aircraft Engines $ 1,976 $ 1,840
Consumer Products 605 536
Industrial Products and Systems 876 1,037
Materials 1,008 1,126
NBC 335 384
Power Systems 3,587 3,668
Technical Products and Services 1,341 1,128
Corporate items and eliminations 439 358
-------- --------
10,167 10,077
Less allowance for losses (362) (350)
-------- --------
$ 9,805 $ 9,727
================================================================================
Receivables balances at December 31, 2001 and 2000, before allowance for
losses, included $5,893 million and $6,323 million, respectively, from sales of
goods and services to customers, and $447 million and $233 million,
respectively, from transactions with associated companies.
Current receivables of $270 million at year-end 2001 and $227 million at
year-end 2000 arose from sales, principally of aircraft engine goods and
services, on open account to various agencies of the U.S. government, which is
GE's largest single customer. About 4%, 3% and 4% of GE's sales of goods and
services were to the U.S. government in 2001, 2000 and 1999, respectively.
-60-
12 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING
LEASES)
December 31 (In millions) 2001 2000
--------- ---------
TIME SALES AND LOANS
Commercial Finance 76,515 51,447
Consumer Finance 45,136 41,918
Equipment Management 293 149
Insurance -- 90
Other 742 2,666
--------- ---------
122,686 96,270
--------- ---------
INVESTMENT IN FINANCING LEASES
Direct financing leases 49,412 46,186
Leveraged leases 6,735 4,877
--------- ---------
56,147 51,063
--------- ---------
178,833 147,333
Less allowance for losses (note 13) (4,801) (4,034)
--------- ---------
$ 174,032 $ 143,299
================================================================================
Time sales and loans represents transactions in a variety of forms,
including time sales, revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business assets. The
portfolio includes time sales and loans carried at the principal amount on which
finance charges are billed periodically, and time sales and loans carried at
gross book value, which includes finance charges. At year-end 2001 and 2000,
commercial real estate loans and leases of $25,466 million and $21,329 million,
respectively, were included in either financing receivables or GECS insurance
receivables. Note 17 contains information on airline loans and leases.
Investment in financing leases consists of direct financing and leveraged
leases of aircraft, railroad rolling stock, autos, other transportation
equipment, data processing equipment and medical equipment, as well as other
manufacturing, power generation, commercial real estate, and commercial
equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, GECS is taxed on total lease payments received
and is entitled to tax deductions based on the cost of leased assets and tax
deductions for interest paid to third-party participants. GECS is generally
entitled to any residual value of leased assets.
-61-
Investment in direct financing and leveraged leases represents net unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. GECS has no general obligation for principal and
interest on notes and other instruments representing third-party participation
related to leveraged leases; such notes and other instruments have not been
included in liabilities but have been offset against the related rentals
receivable. The GECS share of rentals receivable on leveraged leases is
subordinate to the share of other participants who also have security interests
in the leased equipment.
NET INVESTMENT IN FINANCING LEASES
Total Direct
financing leases financing leases Leveraged leases
------------------- ------------------- -------------------
December 31 (In millions) 2001 2000 2001 2000 2001 2000
-------- -------- -------- -------- -------- --------
Total minimum lease payments receivable $ 83,316 $ 74,960 $ 53,870 $ 50,556 $ 29,446 $ 24,404
Less principal and interest on third-party
nonrecourse debt (22,588) (19,773) -- -- (22,588) (19,773)
-------- -------- -------- -------- -------- --------
Net rentals receivable 60,728 55,187 53,870 50,556 6,858 4,631
Estimated unguaranteed residual value of
leased assets 8,996 7,314 5,544 4,602 3,452 2,712
Less deferred income (13,577) (11,438) (10,002) (8,972) (3,575) (2,466)
-------- -------- -------- -------- -------- --------
INVESTMENT IN FINANCING LEASES
(AS SHOWN ABOVE) 56,147 51,063 49,412 46,186 6,735 4,877
Less amounts to arrive at net investment
Allowance for losses (679) (646) (606) (558) (73) (88)
Deferred taxes (9,168) (8,408) (4,643) (4,496) (4,525) (3,912)
-------- -------- -------- -------- -------- --------
NET INVESTMENT IN FINANCING LEASES $ 46,300 $ 42,009 $ 44,163 $ 41,132 $ 2,137 $ 877
===========================================================================================================
-62-
CONTRACTUAL MATURITIES
Total time sales Net rentals
(In millions) and loans (a) receivable (a)
----------------- --------------
Due in
2002 $ 39,162 $15,303
2003 22,585 13,116
2004 19,723 9,057
2005 10,247 6,284
2006 7,729 3,520
2007 and later 23,240 13,448
- --------------------------------------------------------------------------------
Total $122,686 $60,728
================================================================================
(a) Experience has shown that a substantial portion of receivables will be paid
prior to contractual maturity, and these amounts should not be regarded as
forecasts of future cash flows.
- --------------------------------------------------------------------------------
Nonearning consumer receivables were $1,540 million and $1,139 million at
December 31, 2001 and 2000, respectively, a substantial amount of which were
private-label credit card loans. Nonearning and reduced-earning receivables
other than consumer receivables were $1,734 million and $949 million at year-end
2001 and 2000, respectively.
"Impaired" loans are defined by generally accepted accounting principles as
large balance loans for which it is probable that the lender will be unable to
collect all amounts due according to original contractual terms of the loan
agreement. An analysis of impaired loans follows.
December 31 (In millions) 2001 2000
------ ----
Loans requiring allowance for losses $1,041 $475
Loans expected to be fully recoverable 574 384
------ ----
$1,615(a) $859
====== ====
Allowance for losses $ 422 $166
Average investment during year 1,121 801
Interest income earned while impaired (b) 17 20
================================================================================
(a) Includes $408 million of loans classified as impaired by Heller Financial,
Inc., which was acquired in October 2001.
(b) Recognized principally on cash basis.
- --------------------------------------------------------------------------------
-77-
27 OPERATING SEGMENTS
REVENUES (For years ended December 31)
Total revenues Intersegment revenues External revenues
--------------------------------- -------------------------- --------------------------------
(In millions) 2001 2000 1999 2001 2000 1999 2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Aircraft Engines $ 11,389 $ 10,779 $ 10,730 $ 1,282 $ 687 $ 477 $ 10,107 $ 10,092 $ 10,253
Commercial Finance 13,880 11,982 9,822 37 77 42 13,843 11,905 9,780
Consumer Finance 9,508 9,320 7,562 12 4 3 9,496 9,316 7,559
Consumer Products 8,435 8,717 8,525 89 103 107 8,346 8,614 8,418
Equipment Management 4,401 4,969 4,789 90 24 10 4,311 4,945 4,779
Industrial Products and Systems 9,097 8,891 8,642 838 627 524 8,259 8,264 8,118
Insurance 23,890 24,766 19,433 13 2 1 23,877 24,764 19,432
Materials 7,069 8,020 7,118 21 46 38 7,048 7,974 7,080
NBC 5,769 6,797 5,790 -- -- -- 5,769 6,797 5,790
Power Systems 20,211 14,861 10,099 152 144 169 20,059 14,717 9,930
Technical Products and Services 9,011 7,915 6,863 21 19 15 8,990 7,896 6,848
All Other GECS 6,674 15,140 14,143 (152) (107) (56) 6,826 15,247 14,199
Eliminations and corporate items (3,421) (2,304) (1,886) (2,403) (1,626) (1,330) (1,018) (678) (556)
--------- --------- --------- ------- ------- ------- --------- --------- ---------
CONSOLIDATED REVENUES $ 125,913 $ 129,853 $ 111,630 $ -- $ -- $ -- $ 125,913 $ 129,853 $ 111,630
========= ========= ========= ======= ======= ======= ========= ========= =========
GE revenues include income from sales of goods and services to customers and
other income. Sales from one Company component to another generally are priced
at equivalent commercial selling prices.
ASSETS PROPERTY, PLANT AND
EQUIPMENT
ADDITIONS (INCLUDING DEPRECIATION AND
EQUIPMENT LEASED TO OTHERS) AMORTIZATION
For the years ended For the years ended
At December 31 December 31 December 31
----------------------------- ------------------------- ----------------------
(In millions) 2001 2000 1999 2001 2000 1999 2001 2000 1999
-------- -------- -------- ------- ------- ------- ------ ------ ------
Aircraft Engines $ 9,972 $ 10,006 $ 9,333 $ 402 $ 416 $ 368 $ 269 $ 268 $ 320
Commercial Finance 171,255 123,662 106,867 8,829 5,720 7,070 1,430 1,160 986
Consumer Finance 62,978 57,018 58,265 195 184 607 163 289 250
Consumer Products 5,366 4,963 4,554 390 351 329 318 288 279
Equipment Management 25,410 23,531 22,690 4,282 4,800 4,806 1,464 1,394 1,457
Industrial Products and Systems 6,545 5,647 4,561 238 357 230 205 210 234
Insurance 155,500 144,716 118,832 37 103 69 444 1,208 375
Materials 10,517 10,065 9,686 814 573 477 529 485 507
NBC 5,572 5,136 5,371 64 99 94 94 77 83
Power Systems 13,237 11,759 9,944 774 657 514 288 244 236
Technical Products and Services 6,984 6,229 5,163 213 211 164 162 121 148
All Other GECS 10,341 21,709 38,364 401 627 2,880 382 579 590
Corporate items and eliminations (a) 11,346 12,565 11,570 94 55 58 1,341 1,413 1,226
-------- -------- -------- ------- ------- ------- ------ ------ ------
CONSOLIDATED TOTALS $495,023 $437,006 $405,200 $16,733 $14,153 $17,666 $7,089 $7,736 $6,691
======== ======== ======== ======= ======= ======= ====== ====== ======
Additions to property, plant and equipment include amounts relating to principal
businesses purchased.
(a) Depreciation and amortization includes goodwill amortization.
PROVISION FOR INCOME TAXES
(In millions) ----------------------------
For the years ended December 31 2001 2000 1999
- ------------------------------------------------------------------
Commercial Finance $ 757 $ 656 $ 521
Consumer Finance 525 477 224
Equipment Management (136) 204 174
Insurance 221 324 481
All Other GECS 13 251 253
-------- -------- --------
Total $ 1,380 $ 1,912 $ 1,653
======== ======== ========
-78-
BASIS FOR PRESENTATION. The Company's operating businesses are organized based
on the nature of products and services provided. Certain GE businesses do not
meet the definition of a reportable operating segment and have been aggregated.
The Materials segment consists of Plastics and Specialty Materials. The
Industrial Products and Systems segment consists of Industrial Systems,
Transportation Systems and GE Supply. The Technical Products and Services
segment consists of Medical Systems and Global eXchange Services. All Other GECS
consists of IT Solutions, GE Equity, Americom, Wards and other asset impairments
and product line exits.
Details of segment profit by operating segment can be found on page 18 of
this report. A description of operating segments for General Electric Company
and consolidated affiliates follows.
AIRCRAFT ENGINES. Jet engines and replacement parts and repair and maintenance
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); for a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and for executive and commuter aircraft.
Products and services are sold worldwide to airframe manufacturers, airlines and
government agencies. Also includes aircraft engine derivatives, used as marine
propulsion and industrial power sources; the latter is also reported in Power
Systems.
COMMERCIAL FINANCE. Loans, financing and operating leases, and other services
for customers, including manufacturers, distributors and end-users, for a
variety of equipment and major capital assets that includes industrial
facilities and equipment, energy-related facilities, commercial and residential
real estate loans and investments, vehicles, aircraft, and equipment used in
construction, manufacturing, data processing and office applications,
electronics and telecommunications and healthcare.
CONSUMER PRODUCTS. Major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers
and dryers, microwave ovens, room air conditioners and residential water system
products. Products and services are sold in North America and in global markets
under various GE and private-label brands. Distributed to both retail outlets
and direct to consumers, mainly for the replacement market, and to building
contractors and distributors for new installations. Lighting products (including
a wide variety of lamps, lighting fixtures and wiring devices).
CONSUMER FINANCE. Private-label credit card loans, personal loans, time sales
and revolving credit and inventory financing for retail merchants, and auto
leasing and inventory financing.
EQUIPMENT MANAGEMENT. Leases, loans, sales and asset management services for
portfolios of commercial and transportation equipment, including trailers, auto
fleets, modular space units, railroad rolling stock and marine shipping
containers.
INDUSTRIAL PRODUCTS AND SYSTEMS. Electrical distribution and control equipment
(including power delivery and control products such as transformers, meters,
relays, capacitors and arresters); transportation systems products and
maintenance services (including diesel and electric locomotives, transit
propulsion equipment, motorized wheels for off-highway vehicles, and railway
signaling communications systems); electric motors and related products; a broad
range of electrical and electronic industrial automation products (including
drive systems); installation, engineering and repair services, which includes
management and technical expertise for large projects such as process control
systems; and GE Supply, a network of electrical supply houses. Markets are
extremely diverse. Products and services are sold to commercial and industrial
end users, including utilities, to original equipment manufacturers, to
electrical distributors, to retail outlets, to railways and to transit
authorities. Increasingly, products and services are developed for and sold in
global markets.
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INSURANCE. U.S. and international multiple-line property and casualty
reinsurance, certain directly written specialty insurance and life reinsurance,
consumer investment, insurance and retirement services; financial guaranty
insurance, principally on municipal bonds and asset-backed securities, and
private mortgage insurance.
MATERIALS. High-performance engineered plastics used in applications such as
automobiles and housings for computers and other business equipment; ABS resins;
silicones; superabrasive industrial diamonds; quartz products; and laminates.
Products are sold worldwide to a diverse customer base consisting mainly of
manufacturers.
NBC. Principal businesses are the furnishing of U.S. network television services
to more than 220 affiliated stations, production of television programs,
operation of 13 VHF and UHF television broadcasting stations, operation of four
cable/satellite networks around the world, and investment and programming
activities in the Internet, multimedia and cable television.
POWER SYSTEMS. Power plant products and services, including design,
installation, operation and maintenance services. Markets and competition are
global. Gas turbines and aircraft engine derivatives and related services are
sold separately and as part of packaged power plants for electric utilities,
independent power producers and for industrial cogeneration and mechanical drive
applications. Steam turbine-generators and related services are sold to electric
utilities and, for cogeneration, to industrial and other power customers. Also
includes portable power plants, nuclear reactors and fuel and support services
for GE's new and installed boiling water reactors, and equipment to support the
distribution of oil and gas products.
TECHNICAL PRODUCTS AND SERVICES. Medical imaging systems such as magnetic
resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging and
ultrasound, as well as diagnostic cardiology and patient monitoring devices;
related services, including equipment monitoring and repair, computerized data
management and customer productivity services. Products and services are sold
worldwide to hospitals and medical facilities. Also includes a full range of
computer-based information and data interchange services for both internal and
external use to commercial and industrial customers.
ALL OTHER GECS. GECS activities and businesses that management has chosen not to
allocate to one of the four GECS segments including IT Solutions, GE Equity,
Americom, Wards and other asset impairments and product line exits.
Very few of the products financed by GECS are manufactured by GE.