Hi Les
I took a look at the pension footnotes in GE's 1998 and
1997 annual reports. Things looked pretty standard to me.
GE shares a "problem" with many other large, old-line
corporations: pension trust funds exceed the pension
obligation, and this "overfunding" is growing dramatically
(due primarily to the bull market). The accounting rules
force the company to eventually show the overfundiung as
an asset of the company (in the same way that underfunding
would show up as a liability on the company's balance
sheet).
"Regular" Pension Income ($000,000) for 1995, 1996, 1997
and 1998 was 697, 709, 743 and 1,016. An extraordinary
charge (probably resulting from an early retirement
window) of 412 in 1997 lowered the income amount from 743
to 331.
I would estimate that Fiscal 1999 Pension Income would be
$1,300 (assuming no extraordinary charges).
1998 1997 1996
Trust Assets 43447 38742 33686
Pension Oblig. 27572 25874 23251
Overfunding 15875 12868 10435
Recog. on Bal Sh 7752 6574 6112
48.8% 51.1% 58.6%
The overfunding has grown from roughly 10 billion to 16 billion;
7.752 billion of this overfunding has been recorded on the
company's balance sheet via recognizing pension income on
the p+l statement.
A final point. Pension income is driven by (among other
factors) expected return on assets. GE is using a 9.5%
expected return rate. So, in a year where assets return
25% instead of 9.5%, the amount recorded as pension income
only reflects the expected 9.5% rate, with the remaining
asset gains (diff betw. 25 and 9.5) remaining off the
balance sheet to be recognized in the future.
Oh, as I'm sure you know, these are all non-cash
transactions. Assets are never transferred from the trust
fund to the company, so the pension asset which is
eventually built up on the company's balance sheet is
really kind of a weird animal.
I would be happy to answer questions from anyone sick
enough to express interest. -gggg- |
