GE 2005 Annual Report Download - page 33

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Our principal pension plans had a surplus of $5.8 billion at December 31, 2005. We will not make any
contributions to the GE Pension Plan in 2006. To the best of our ability to forecast the next five years, we do not
anticipate making contributions to that plan so long as expected investment returns are achieved. At December 31,
2005, the fair value of assets for our other pension plans was $2.9 billion less than their respective projected benefit
obligations. We expect to contribute $0.4 billion to these plans in 2006, the same amount that was contributed in
2005 and 2004, respectively.
The funded status of our postretirement benefit plans and future effects on operating results depend on
economic conditions and investment performance. See notes 6 and 7 for additional information about funded status,
components of earnings effects and actuarial assumptions. See the Critical Accounting Estimates section for
discussion of pension assumptions.
GE OTHER COSTS AND EXPENSES are selling, general and administrative expenses, which increased 11% to
$13.3 billion in 2005, following a 22% increase in 2004, substantially the result of acquisitions in both years.
GE OPERATING PROFIT is earnings from continuing operations before interest and other financial charges,
income taxes and the effects of accounting changes. GE operating profit was $13.3 billion in 2005, up from $11.4
billion in 2004 and $11.6 billion in 2003 (14.4%, 13.7% and 16.4% of GE total revenues in 2005, 2004 and 2003,
respectively). The increase in 2005 operating profit reflected higher productivity (principally Healthcare and
Infrastructure), volume (Infrastructure and NBC Universal) and prices (Industrial), partially offset by higher other
costs across all segments. The decrease in 2004 reflected the combination of higher material and other costs
(Industrial and NBC Universal), higher pension costs, lower prices (Infrastructure and Healthcare) and lower
productivity (Infrastructure and NBC Universal), partially offset by increased volume (NBC Universal and
Healthcare, reflecting 2004 combination/acquisition activity).
RESTATED INTEREST ON BORROWINGS AND OTHER FINANCIAL CHARGES amounted to $15.1
billion, $11.6 billion and $10.4 billion in 2005, 2004 and 2003, respectively. Substantially all of our borrowings are
through GECS, where interest expense was $14.3 billion, $11.1 billion and $9.9 billion in 2005, 2004 and 2003,
respectively. Changes over the three-year period reflected increased average borrowings and increased interest rates.
GECS average borrowings were $346.1 billion, $319.2 billion and $305.0 billion in 2005, 2004 and 2003,
respectively. GECS average composite effective interest rate was 4.2% in 2005, compared with 3.5% in 2004 and
3.2% in 2003. Proceeds of these borrowings were used in part to finance asset growth and acquisitions. In 2005,
GECS average assets of $487.0 billion were 10% higher than in 2004, which in turn were 15% higher than in 2003.
See the Financial Resources and Liquidity section for a discussion of interest rate risk management.
RESTATED INCOME TAXES
Income taxes are a significant cost. As a global commercial enterprise, our tax rates are affected by many factors,
including our global mix of earnings, legislation, acquisitions, dispositions and tax characteristics of our income.
Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax
provisions.