GE 2006 Annual Report Download - page 113

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U.S. GAAP requires earnings of discontinued operations to be
displayed separately in the Statement of Earnings. Accordingly,
the numerators used in our calculations of returns on average
shareowners’ equity and average total capital invested presented
in Selected Financial Data on page 67 exclude those earnings
(losses). Further, we believe that it is appropriate to exclude from
the denominators, specifically the average total shareowners’
equity component, the cumulative effect of those earnings for
each of the years for which related discontinued operations were
presented, as well as our average net investment in discontinued
operations since the second half of 2005. Had we disposed of
these operations before mid-2005, proceeds would have been
applied to reduce parent-supported debt at GE Capital; however,
since parent-supported debt at GE Capital was retired in the fi rst
half of 2005, we have assumed that any proceeds after that time
would have been distributed to shareowners by means of share
repurchases, thus reducing average total shareowners’ equity.
Definitions indicating how the above-named ratios are calcu-
lated using average total shareowners’ equity, excluding effects
of discontinued operations, can be found in the Glossary.
GE Growth from 2001 to 2006, Excluding Pensions
(In millions) 2006 2001
GE earnings from continuing operations
as reported $20,666 $12,620
Less after-tax pension costs (570) 1,362
GE earnings from continuing operations
excluding after-tax pension costs $21,236 $11,258
GE Tax Rate, Excluding GECS Earnings
(In millions) 2006 2005 2004
GE earnings from continuing
operations before income taxes $23,246 $21,411 $18,574
Less GECS earnings from continuing
operations 10,495 9,527 8,169
Total $12,751 $11,884 $10,405
GE provision for income taxes $ 2,580 $ 2,750 $ 1,973
GE effective tax rate, excluding
GECS earnings 20.2% 23.1% 19.0%
We believe that meaningful analysis of our fi nancial performance
requires an understanding of the factors underlying that perfor-
mance and our judgments about the likelihood that particular
factors will repeat. In some cases, short-term patterns and
long-term trends may be obscured by large factors or events.
For example, events or trends in a particular segment may be so
significant as to obscure patterns and trends of our industrial or
financial services businesses in total. For this reason, we believe
that investors may find it useful to see our 2006 revenue growth
without the effect of acquisitions, dispositions and currency
exchange rates, and without the effects of the 2006 and 2004
Olympics broadcasts, the May 2005 SFAS 133 correction and the
GECS commercial paper interest rate swap adjustment, which if
included would overshadow trends in ongoing revenues. Similarly,
we believe that investors would find it useful to compare our
industrial operating profit and consolidated earnings from con-
tinuing operations excluding the effects of pension costs which
can vary from period to period and our 2006 operating cash fl ow
against our 2005 operating cash flow without the effects of
GECS dividends which can also vary from period to period.
Delinquency Rates on Certain Financing Receivables
Delinquency rates on managed Commercial Finance equipment
loans and leases and managed GE Money fi nancing receivables
follow.
COMMERCIAL FINANCE
December 31 2006 2005 2004
Managed 1.22% 1.31% 1.40%
Off-book
0.52 0.76 0.90
On-book 1.42 1.53 1.58
GE MONEY
December 31 2006 2005 2004
Managed 5.05% 5.08% 4.85%
Off-book
5.49 5.28 5.09
On-book 5.01 5.07 4.84
We believe that delinquency rates on managed fi nancing receivables
provide a useful perspective on our on and off-book portfolio quality
and are key indicators of fi nancial performance.
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