GE 2006 Annual Report Download - page 63

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that curve) and further assumed that the increase remained
in place for 2007. We estimated, based on that year-end 2006
portfolio and holding everything else constant, that our 2007
GE consolidated net earnings would decline by $0.2 billion.
• It is our policy to minimize currency exposures and to conduct
operations either within functional currencies or using the
protection of hedge strategies. We analyzed year-end 2006
consolidated currency exposures, including derivatives desig-
nated and effective as hedges, to identify assets and liabilities
denominated in other than their relevant functional currencies.
For such assets and liabilities, we then evaluated the effects
of a 10% shift in exchange rates between those currencies
and the U.S. dollar. This analysis indicated that there would
be an inconsequential effect on 2007 earnings of such a shift
in exchange rates.
Consolidated Statement of Changes in Shareowners’ Equity
Shareowners’ equity increased by $3.0 billion and $31.2 billion in
2006 and 2004, respectively, and decreased by $1.6 billion in 2005.
Changes over the three-year period were largely attributable to
net earnings, partially offset by dividends declared of $10.7 billion,
$9.6 billion and $8.6 billion in 2006, 2005 and 2004, respectively.
In 2006, we purchased $7.8 billion of GE stock (229.4 million shares)
and in 2005, we purchased $5.3 billion of GE stock (153.3 million
shares) under our $25 billion share repurchase program. In 2004,
we issued 341.7 million shares of stock in connection with the
Amersham acquisition, which increased equity by $10.7 billion,
and 119.4 million shares of stock to partially fund the combination
of NBC and VUE, which increased equity by $3.8 billion. Currency
translation adjustments increased equity by $3.6 billion in 2006
and $3.9 billion in 2004, compared with a $4.3 billion decrease in
2005. Changes in currency translation adjustments refl ect the
effects of changes in currency exchange rates on our net invest-
ment in non-U.S. subsidiaries that have functional currencies
other than the U.S. dollar. As of December 31, 2006, the U.S. dollar
was weaker than the pound sterling and the euro and slightly
stronger than the Japanese yen. As of December 31, 2005, the
U.S. dollar was stronger than the pound sterling, the euro and
the Japanese yen. As of December 31, 2004, the pound sterling,
the euro and to a lesser extent, Asian currencies were stronger
than the U.S. dollar. See note 23. Accumulated currency translation
adjustments affect net earnings only when all or a portion of an
affiliate is disposed of or substantially liquidated.
Overview of Our Cash Flow from 2004 through 2006
GE cash from operating activities (CFOA) is a useful measure of
performance for our non-financial businesses and totaled
$24.6 billion in 2006, $21.6 billion in 2005 and $15.2 billion in
2004. Generally, factors that affect our earnings — for example,
pricing, volume, costs and productivity — affect CFOA similarly.
However, while management of working capital, including timing
of collections and payments and levels of inventory, affects
operating results only indirectly, the effect of these programs
on CFOA can be signifi cant.
GE CUMULATIVE
CASH FLOWS 2002–2006 2002 2003 2004 2005 2006
(In $ billions) 84
60
38
23
A. Cash flows from
operating activities 10
B. Dividends paid
C. Shares repurchased ($)
Our GE Statement of Cash Flows shows CFOA in the required
format. While that display is of some use in analyzing how various
assets and liabilities affected our year-end cash positions, we
believe that it is also useful to supplement that display and to
examine in a broader context the business activities that provide
and require cash.
December 31 (In billions) 2006 2005 2004
Operating cash collections $ 98.2 $ 89.9 $ 81.6
Operating cash payments (83.4) (76.1) (69.5)
Cash dividends from GECS 9.8 7.8 3.1
GE cash from operating activities $ 24.6 $ 21.6 $ 15.2
The most significant source of cash in CFOA is customer-related
activities, the largest of which is collecting cash following a
product or services sale. GE operating cash collections increased
by $8.3 billion during both 2006 and 2005. These increases are
consistent with the changes in comparable GE operating segment
revenues, comprising Healthcare, NBC Universal and the industrial
businesses of the Industrial and Infrastructure segments. Analyses
of operating segment revenues discussed in the preceding
Segment Operations section is the best way of understanding
their customer-related CFOA.
The most significant operating use of cash is to pay our
suppliers, employees, tax authorities and others for the wide
range of materials and services necessary in a diversifi ed
global organization. GE operating cash payments increased by
$7.3 billion in 2006 and by $6.6 billion in 2005, comparable to
the increases in GE total costs and expenses.
Dividends from GECS represented distribution of a portion of
GECS retained earnings, including proceeds from certain business
sales, and are distinct from cash from continuing operating
activities within the financial services businesses, which increased
in 2006 by $2.1 billion to $21.9 billion and decreased in 2005 by
$0.7 billion to $19.8 billion. The amount we show in CFOA is
the total dividend, including the normal dividend as well as any
special dividends from excess capital primarily resulting from
GECS business sales.
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