General Electric Co, responding to concern that its accounting lacks transparency, released a more detailed annual report, including additional specifics about the GE Capital finance unit.
GE, the world's largest company by market value, listed sales and operating profit from 26 of its main industrial and finance businesses, compared with a dozen last year. The company also highlighted information on its special purpose entities, often used to package credit-card loans and other receivables that are later sold to investors.
Some investors have been critical of the limited details that were provided on the businesses that make up GE Capital, which accounts for 40 percent of the company's profits. GE Chief Executive Jeffrey Immelt pledged to provide more information as investors began to question the accounting practices of many companies following the collapse of Enron Corp.
"Investors are reading through like crazy, picking through the salient versus background," said Clay Hoes, an analyst at American Express Financial Advisors, which holds 54.1 million in GE shares and manages US$234 billion in assets. ``Judging by the stock, I guess everybody felt quasi-comfortable by what they read so far.'' Shares of Fairfield, Connecticut-based General Electric fell 33 cents to US$40.62. The stock has risen 1.3 percent this year, while the entire Dow Jones Industrial Average climbed 5.5 percent.
General Electric had US$43 billion in off balance sheet assets in special purpose entities at the end of last year. That's 39 percent more than the US$31 billion in 2000. The company gave details of restrictions on the entities and why it uses them. None are allowed to hold GE stock.
Some of Enron's special entities were capitalized with the company's stock. That helped to speed Enron's demise when the shares plunged as losses masked by the entities were disclosed.
"Great companies are built on the foundation of accurate financial information and compliance with the law," Immelt wrote in the introduction to the financial section.
Some analysts who signed confidentiality agreements were briefed on the financial information ahead of time, a measure permitted under Regulation FD, said spokesman David Frail. The pacts prohibited them from acting on the information.
Regulation FD, enacted in 2000, was designed to prevent selective disclosure of sensitive financial information.
GE will also take a first-quarter write down of about US$1 billion to comply with a new accounting rule that changes the way it must account for goodwill from acquisitions. GE completed or announced almost US$23 billion in acquisitions in 2001, Immelt said in a letter to shareholders. The company had profit of US$13.7 billion, or US$1.41 a share, on sales of US$125.9 billion last year.
If GE Capital's short-term credit rating is cut, the company may have to provide as much as US$43.2 billion in substitute liquidity for assets owned by the special purpose entities. The commitment could rise another US$9.4 billion if the entities take ownership of a new group of assets, the company said.
GE wouldn't have to provide the support all at once since the obligations are short-term IOUs that come due in waves. The company requires that special purpose entity assets are of equal or higher quality compared with its own assets, the report said.