Form 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
Amendment No. 1 to Form 10-K

(Mark One)
 
þ 
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2005
or
 
¨ 
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from ___________to ___________
 
Commission file number 1-35
 
General Electric Company
(Exact name of registrant as specified in charter)

New York
     
14-0689340
(State or other jurisdiction of incorporation or organization)
     
(I.R.S. Employer Identification No.)
 
       
3135 Easton Turnpike, Fairfield, CT
 
06828-0001
 
203/373-2211
(Address of principal executive offices)
 
(Zip Code)
 
(Telephone No.)
         
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common stock, par value $0.06 per share
 
New York Stock Exchange
Boston Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:
 
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
 
The aggregate market value of the outstanding common equity of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $367.3 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares. There were 10,423,424,768 shares of voting common stock with a par value of $0.06 outstanding at February 10, 2006.
 
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareowners, held on April 26, 2006, is incorporated by reference in Part III to the extent described therein.
 

 


(1)




 
Table of Contents
 
   
Page
   
 
   
Part I 
 
     
Business
10
Risk Factors
22
Unresolved Staff Comments
23
Properties
23
Legal Proceedings
23
Submission of Matters to a Vote of Security Holders
24
   
Part II 
 
     
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
24
Selected Financial Data
25
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Quantitative and Qualitative Disclosures About Market Risk
65
Financial Statements and Supplementary Data
65
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
144
Controls and Procedures
144
Other Information
147
   
Part III 
 
     
Directors and Executive Officers of the Registrant
148
Executive Compensation
149
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
149
Certain Relationships and Related Transactions
149
Principal Accounting Fees and Services
149
   
Part IV 
 
     
Exhibits, Financial Statement Schedules
150
 
156




(2)




Explanatory Note
 
Overview
 
General Electric Company (GE) is filing this amendment to its Annual Report on Form 10-K for the year ended December 31, 2005, to amend and restate financial statements and other financial information for the years 2005, 2004 and 2003, and financial information for the years 2002 and 2001, and for each of the quarters in the years 2005 and 2004. In addition, we are filing amendments to our Quarterly Reports on Form 10-Q for each of the periods ended September 30, June 30, and March 31, 2006, to amend and restate financial statements for the first three quarters of 2006. The restatement adjusts our accounting for interest rate swap transactions related to a portion of the commercial paper issued by General Electric Capital Corporation (GECC) and General Electric Capital Services, Inc. (GECS), each wholly-owned subsidiaries of GE, from January 1, 2001, the date we adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The restatement has no effect on our cash flows or liquidity, and its effects on our financial position at the ends of the respective restated periods are immaterial. We have not found that any of our hedge positions were inconsistent with our risk management policies or economic objectives.
 
A comparison of the cumulative earnings effects of this non-cash restatement to cumulative earnings from continuing operations before accounting changes follows.
 
(In millions)
Cumulative January 1, 2001-
December 31, 2005
 
         
         
Decrease in earnings from continuing operations before
       
accounting changes
$
(473
)
 
         
Earnings from continuing operations before accounting changes
       
and error corrections
$
77,072
   

 
Background
 
As previously disclosed, the Boston Office of the U.S. Securities and Exchange Commission (SEC) is conducting a formal investigation of our application of SFAS 133. In the course of that investigation, the SEC Enforcement staff raised certain concerns about our accounting for the use of interest rate swaps to fix certain otherwise variable interest costs in a portion of our commercial paper program at GECC and GECS. The SEC Enforcement staff referred such concerns to the Office of Chief Accountant. We and our auditors determined that our accounting for the commercial paper hedging program satisfied the requirements of SFAS 133 and conveyed our views to the staff of the Office of Chief Accountant. Following our discussions, however, the Office of Chief Accountant communicated its view to us that our commercial paper hedging program as structured did not meet the SFAS 133 specificity requirement.
 

(3)


After considering the staff’s view, management recommended to the Audit Committee of our Board of Directors that previously reported financial results be restated to eliminate hedge accounting for the interest rate swaps entered into as part of our commercial paper hedging program from January 1, 2001. The Audit Committee discussed and agreed with this recommendation. At a meeting on January 18, 2007, the Board of Directors adopted the recommendation of the Audit Committee and determined that previously reported results for GE should be restated and, therefore, that the previously filed financial statements and other financial information referred to above should not be relied upon. The restatement resulted from a material weakness in internal control over financial reporting, namely, that we did not have adequately designed procedures to designate, with the specificity required under SFAS 133, each hedged commercial paper transaction.
 
As of January 1, 2007, we modified our commercial paper hedging program and adopted documentation for interest rate swaps that we believe complies with the requirements of SFAS 133 and remediated the related internal control weakness.
 
The SEC investigation into our application of SFAS 133 and hedge accounting is continuing. We continue to cooperate fully.
 
Amendment to this Form 10-K
 
The following sections of this Form 10-K have been revised to reflect the restatement: Part I - Item 1 - Business; Part II - Item 6 - Selected Financial Data, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7A - Quantitative and Qualitative Disclosures About Market Risk; Item 8 - Financial Statements and Supplementary Data and Item 9A - Controls and Procedures; and Part IV - Item 15 - Exhibits and Financial Statement Schedules. Except to the extent relating to the restatement of our financial statements and other financial information described above, the financial statements and other disclosures in this Form 10-K do not reflect any events that have occurred after this Form 10-K was initially filed on March 3, 2006.
 
Effects of Restatement
 
The following tables set forth the effects of the restatement relating to the aforementioned hedge accounting on affected line items within our previously reported Statements of Earnings for the years 2005, 2004, 2003, 2002 and 2001, and for each of the quarters in the years 2005 and 2004. The restatement has no effect on our cash flows or liquidity, and its effects on our financial position at the ends of the respective restated periods are immaterial.
 

(4)


Effects on Statements of Earnings
 

Income (expense);(in millions;
per share amounts in dollars)
Cumulative
through
12/31/05
 
2005
 
2004
 
2003
 
2002
 
2001
 
                                     
GECS commercial paper
                                   
interest rate swap
                                   
adjustment(a)
$
(800
)
$
540
 
$
518
 
$
535
 
$
(1,889
)
$
(504
)
Interest and other financial
                                   
charges
 
24
   
49
   
45
   
1
   
(38
)
 
(33
)
Provision for income taxes
 
303
   
(231
)
 
(222
)
 
(211
)
 
758
   
209
 
Earnings from continuing
                                   
operations before
                                   
accounting changes
 
(473
)
 
358
   
341
   
325
   
(1,169
)
 
(328
)
Earnings before
                                   
accounting changes
 
(473
)
 
358
   
341
   
325
   
(1,169
)
 
(328
)
Net earnings
$
(473
)
$
358
 
$
341
 
$
325
 
$
(1,169
)
$
(328
)

(a)
Included in total revenues.

 

(5)



   
2005
   
2004
   
2003
   
2002
   
2001
 
                               
Per-share amounts - earnings from continuing
                             
operations before accounting changes
                             
Diluted, as reported
$
1.72
 
$
1.56
 
$
1.37
 
$
1.58
 
$
1.29
 
Adjustment
 
0.04
   
0.03
   
0.03
   
(0.12
)
 
(0.03
)
Diluted, as restated
$
1.76
 
$
1.59
 
$
1.40
 
$
1.46
 
$
1.26
 
                               
Basic, as reported
$
1.73
 
$
1.57
 
$
1.37
 
$
1.59
 
$
1.30
 
Adjustment
 
0.03
   
0.03
   
0.04
   
(0.12
)
 
(0.03
)
Basic, as restated
$
1.76
 
$
1.60
 
$
1.41
 
$
1.47
 
$
1.27
 
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
$
(0.18
)
$
0.05
 
$
0.20
 
$
(0.06
)
$
0.11
 
Adjustment
 
-
   
-
   
-
   
-
   
-
 
Diluted, as restated
$
(0.18
)
$
0.05
 
$
0.20
 
$
(0.06
)
$
0.11
 
                               
Basic, as reported
$
(0.18
)
$
0.05
 
$
0.21
 
$
(0.06
)
$
0.11
 
Adjustment
 
-
   
-
   
-
   
-
   
-
 
Basic, as restated
$
(0.18
)
$
0.05
 
$
0.21
 
$
(0.06
)
$
0.11
 
                               
Per-share amounts - earnings before accounting
                             
changes
                             
Diluted, as reported
$
1.54
 
$
1.61
 
$
1.57
 
$
1.51
 
$
1.40
 
Adjustment
 
0.03
   
0.03
   
0.03
   
(0.11
)
 
(0.03
)
Diluted, as restated
$
1.57
 
$
1.64
 
$
1.60
 
$
1.40
 
$
1.37
 
                               
Basic, as reported
$
1.55
 
$
1.62
 
$
1.58
 
$
1.52
 
$
1.42
 
Adjustment
 
0.03
   
0.03
   
0.03
   
(0.11
)
 
(0.04
)
Basic, as restated
$
1.58
 
$
1.65
 
$
1.61
 
$
1.41
 
$
1.38
 
                               
Per-share amounts - cumulative effect of
                             
accounting changes
                             
Diluted, as reported
$
-
 
$
-
 
$
(0.06
)
$
(0.10
)
$
(0.03
)
Adjustment
 
-
   
-
   
-
   
-
   
-
 
Diluted, as restated
$
-
 
$
-
 
$
(0.06
)
$
(0.10
)
$
(0.03
)
                               
Basic, as reported
$
-
 
$
-
 
$
(0.06
)
$
(0.10
)
$
(0.03
)
Adjustment
 
-
   
-
   
-
   
-
   
-
 
Basic, as restated
$
-
 
$
-
 
$
(0.06
)
$
(0.10
)
$
(0.03
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
$
1.54
 
$
1.61
 
$
1.51
 
$
1.41
 
$
1.37
 
Adjustment
 
0.03
   
0.03
   
0.03
   
(0.11
)
 
(0.03
)
Diluted, as restated
$
1.57
 
$
1.64
 
$
1.54
 
$
1.30
 
$
1.34
 
                               
Basic, as reported
$
1.55
 
$
1.62
 
$
1.52
 
$
1.42
 
$
1.39
 
Adjustment
 
0.03
   
0.03
   
0.03
   
(0.11
)
 
(0.03
)
Basic, as restated
$
1.58
 
$
1.65
 
$
1.55
 
$
1.31
 
$
1.36
 
                               

 

(6)



 
2005
 
Income (expense);(in millions;
per share amounts in dollars)
Total
 
First quarter
 
Second quarter
 
Third quarter
 
Fourth
quarter
 
                               
GECS commercial paper interest
                             
rate swap adjustment (a)
$
540
 
$
358
 
$
(239
)
$
271
 
$
150
 
Interest and other financial
                             
charges
 
49
   
12
   
11
   
13
   
13
 
Provision for income taxes
 
(231
)
 
(145
)
 
89
   
(111
)
 
(64
)
Earnings from continuing operations
 
358
   
225
   
(139
)
 
173
   
99
 
Net earnings
$
358
 
$
225
 
$
(139
)
$
173
 
$
99
 
                               
(a)
Included in total revenues.
                               
   
2005
 
     
First quarter
 
Second quarter
 
Third quarter
 
Fourth
quarter
 
                               
Per-share amounts - earnings from
                             
continuing operations
                             
Diluted, as reported
     
$
0.33
 
$
0.41
 
$
0.43
 
$
0.55
 
Adjustment
       
0.03
   
(0.01
)
 
0.02
   
0.01
 
Diluted, as restated
     
$
0.36
 
$
0.40
 
$
0.45
 
$
0.56
 
                               
Basic, as reported
     
$
0.34
 
$
0.41
 
$
0.43
 
$
0.55
 
Adjustment
       
0.02
   
(0.01
)
 
0.02
   
0.01
 
Basic, as restated
     
$
0.36
 
$
0.40
 
$
0.45
 
$
0.56
 
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
     
$
0.04
 
$
0.03
 
$
0.01
 
$
(0.26
)
Adjustment
       
-
   
-
   
-
   
-
 
Diluted, as restated
     
$
0.04
 
$
0.03
 
$
0.01
 
$
(0.26
)
                               
Basic, as reported
     
$
0.04
 
$
0.03
 
$
0.01
 
$
(0.26
)
Adjustment
       
-
   
-
   
-
   
-
 
Basic, as restated
     
$
0.04
 
$
0.03
 
$
0.01
 
$
(0.26
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
     
$
0.37
 
$
0.44
 
$
0.44
 
$
0.29
 
Adjustment
       
0.02
   
(0.02
)
 
0.02
   
0.01
 
Diluted, as restated
     
$
0.39
 
$
0.42
 
$
0.46
 
$
0.30
 
                               
Basic, as reported
     
$
0.37
 
$
0.44
 
$
0.44
 
$
0.29
 
Adjustment
       
0.03
   
(0.01
)
 
0.02
   
0.01
 
Basic, as restated
     
$
0.40
 
$
0.43
 
$
0.46
 
$
0.30
 
                               

(7)



 
2004
 
Income (expense);(in millions;
per share amounts in dollars)
Total
 
First quarter
 
Second quarter
 
Third quarter
 
Fourth
quarter
 
                               
GECS commercial paper interest
                             
rate swap adjustment (a)
$
518
 
$
(233
)
$
970
 
$
(381
)
$
162
 
Interest and other financial charges
 
45
   
10
   
10
   
13
   
12
 
Provision for income taxes
 
(222
)
 
87
   
(384
)
 
144
   
(69
)
Earnings from continuing operations
 
341
   
(136
)
 
596
   
(224
)
 
105
 
Net earnings
$
341
 
$
(136
)
$
596
 
$
(224
)
$
105
 
                               
(a)
Included in total revenues.
                               
     
2004
 
     
First quarter
 
Second quarter
 
Third quarter
 
Fourth
quarter
 
                               
Per-share amounts - earnings from
                             
continuing operations
                             
Diluted, as reported
     
$
0.29
 
$
0.35
 
$
0.37
 
$
0.54
 
Adjustment
       
(0.01
)
 
0.06
   
(0.02
)
 
0.01
 
Diluted, as restated
     
$
0.28
 
$
0.41
 
$
0.35
 
$
0.55
 
                               
Basic, as reported
     
$
0.29
 
$
0.35
 
$
0.37
 
$
0.54
 
Adjustment
       
(0.01
)
 
0.06
   
(0.02
)
 
0.01
 
Basic, as restated
     
$
0.28
 
$
0.41
 
$
0.35
 
$
0.55
 
                               
Per-share amounts - earnings (loss) from
                             
discontinued operations
                             
Diluted, as reported
     
$
0.04
 
$
0.01
 
$
0.01
 
$
(0.01
)
Adjustment
       
-
   
-
   
-
   
-
 
Diluted, as restated
     
$
0.04
 
$
0.01
 
$
0.01
 
$
(0.01
)
                               
Basic, as reported
     
$
0.04
 
$
0.01
 
$
0.01
 
$
(0.01
)
Adjustment
       
-
   
-
   
-
   
-
 
Basic, as restated
     
$
0.04
 
$
0.01
 
$
0.01
 
$
(0.01
)
                               
Per-share amounts - net earnings
                             
Diluted, as reported
     
$
0.33
 
$
0.36
 
$
0.38
 
$
0.53
 
Adjustment
       
(0.01
)
 
0.06
   
(0.02
)
 
0.01
 
Diluted, as restated
     
$
0.32
 
$
0.42
 
$
0.36
 
$
0.54
 
                               
Basic, as reported
     
$
0.33
 
$
0.36
 
$
0.39
 
$
0.53
 
Adjustment
       
(0.01
)
 
0.06
   
(0.03
)
 
0.01
 
Basic, as restated
     
$
0.32
 
$
0.42
 
$
0.36
 
$
0.54
 

 
Reversal of these cumulative adjustments will affect net earnings positively over the terms of the underlying interest rate swaps, but to a degree that we do not expect to be significant in any individual period given the terms of the arrangements and actions taken to eliminate the accounting volatility by modifying the documentation in a manner that will enable the swaps to qualify for hedge accounting effective January 1, 2007.
 

(8)


For additional information relating to the effect of the restatement, see the following items:
 
Part I
 
Item 1 - Business
 
Part II:
 
Item 6 - Selected Financial Data
 
Item 7 - Management’s Discussion and Analysis of Results of Operations and Financial Condition
 
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
 
Item 8 - Financial Statements and Supplementary Data
 
Item 9 - Controls and Procedures
 
Part IV:
 
Item 15 - Exhibits and Financial Statement Schedules
 
In light of the restatement, readers should not rely on our previously filed financial statements and other financial information for the years and for each of the quarters in the years 2005, 2004, 2003, 2002 and 2001.
 

(9)


Part I
 
 
Item 1. Business
 
General
 
Unless otherwise indicated by the context, we use the terms “GE,” “GECS” and “GE Capital” on the basis of consolidation described in note 1 to the consolidated financial statements of General Electric Company (the Company) on page 80. Also, unless otherwise indicated by the context, “General Electric” means the parent company, General Electric Company.
 
General Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain executive offices at 3135 Easton Turnpike, Fairfield, CT 06828-0001.
 
GE is one of the largest and most diversified industrial corporations in the world. We have engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity since our incorporation in 1892. Over the years, we have developed or acquired new technologies and services that have broadened considerably the scope of our activities.
 
Our products include major appliances; lighting products; industrial automation products; medical diagnostic imaging systems; bioscience assays and separation technology products; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; chemicals and equipment for treatment of water and process systems; security equipment and systems; and engineered materials, such as plastics and silicones.
 
Our services include product services; electrical product supply houses; electrical apparatus installation, engineering, and repair and rebuilding services. Through our affiliate, NBC Universal, Inc., we produce and deliver network television services, operate television stations, produce and distribute motion pictures, operate cable/satellite networks, operate theme parks, and program activities in multimedia and the Internet. Through another affiliate, General Electric Capital Services, Inc., we offer a broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, and reinsurance.
 
In virtually all of our global business activities, we encounter aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development, as well as customer commitments. With respect to manufacturing operations, we believe that, in general, we are one of the leading firms in most of the major industries in which we participate. The NBC Television Network is one of four major U.S. commercial broadcast television networks. We also compete with syndicated broadcast television programming, cable and satellite television programming activities and in the motion picture industry. The businesses in which GECS engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, consumer loan companies, independent finance companies, finance companies associated with manufacturers, and insurance and reinsurance companies.
 

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This document contains “forward-looking statements” - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; unanticipated loss development in our insurance businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
 
Our consolidated global revenues increased to $77.9 billion in 2005, compared with $66.9 billion in 2004 and $54.3 billion in 2003. For additional information about our global operations, see pages 45 and 46.
 
Operating Segments
 
Segment revenue and profit information is presented on page 38. Additional financial data and commentary on recent financial results for operating segments are provided on pages 36, 37 and 39-44 and in note 26 (pages 127 and 128) to the consolidated financial statements.
 
In the fourth quarter of 2005, we announced the planned sale of the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions Corporation (GE Insurance Solutions) and completed a Genworth Financial, Inc. (Genworth) secondary public offering, which reduced our ownership in Genworth to 18%. We have reported both GE Insurance Solutions and Genworth as discontinued operations for all periods presented. These businesses were previously reported in the Commercial Finance segment. Also, during the fourth quarter of 2005, our insurance activities, previously reported in the Commercial Finance segment, were transferred to corporate items and eliminations for all periods presented.
 
Operating businesses that are reported as segments include Infrastructure, Industrial, Healthcare, NBC Universal, Commercial Finance and Consumer Finance. There is appropriate elimination of the net earnings of GECS and the immaterial effect of transactions between segments to arrive at total consolidated data. A summary description of each of our operating segments follows.
 
We will also continue our longstanding practice of providing supplemental information for certain businesses within the segments.
 
Infrastructure
 
Infrastructure (27.8%, 27.7% and 32.2% of consolidated revenues in 2005, 2004 and 2003, respectively) produces, sells, finances and services equipment for the air transportation and energy generation industries. We also produce, sell and service equipment for the rail transportation and water treatment industries. During 2005, we made a number of acquisitions, the most significant of which was Ionics, Inc.
 
Our operations are located in North America, Europe, Asia and South America.
 

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Aviation and Aviation Financial Services
 
Aviation produces, sells and services jet engines, turboprop and turbo shaft engines, and related replacement parts for use in military and commercial aircraft. Our military engines are used in a wide variety of aircraft including fighters, bombers, tankers, helicopters and surveillance aircraft and our commercial engines power aircraft in all categories of range: short/medium, intermediate and long-range, as well as executive and regional aircraft. We also produce engines through CFM International, a company jointly owned by GE and Snecma Moteurs of France; and a new engine is being designed and marketed in a joint venture with the Pratt & Whitney division of United Technologies Corporation.
 
We provide maintenance, component repair and overhaul services (MRO), including sales of replacement parts, for many models of engines, including repair and overhaul of engines manufactured by competitors.
 
The worldwide competition in aircraft jet engines and MRO (including parts sales) is intense. Both U.S. and export markets are important. Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures, both customer-financed and internally funded, are important in this business, as are focused intellectual property strategies and protection of key aircraft engine design, manufacture, repair and product upgrade technologies.
 
Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in technology, the small number of potential customers and the limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline procurement cycles, although these cycles differ from each other.
 
Aviation Financial Services is a global commercial aviation financial services business that offers a broad range of financial products to airlines, aircraft operators, owners, lenders, investors and airport developers. Financial products include leases, aircraft purchasing and trading, loans, engine/spare parts financing, pilot training, fleet planning and financial advisory services. We operate in a highly competitive environment. Our competitors include aircraft manufacturers, banks, financial institutions, and other finance and leasing companies. Competition is based on lease rates and terms, as well as aircraft delivery dates, condition and availability.
 
The U.S. commercial aviation industry continues to face challenges and financial pressure that affect a portion of our commercial aviation business. Many carriers are experiencing major restructuring and reorganization, including bankruptcies. These companies have experienced marginal returns and in some cases losses resulting from competitive pressures and increased fuel costs.
 

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Energy and Energy Financial Services
 
Energy serves power generation, industrial, government and other customers worldwide with products and services related to energy production, distribution and management. We offer wind turbines as part of our renewable energy portfolio, which also includes hydropower, solar, and geothermal technology. We also sell aircraft engine derivatives for use as industrial power sources. Gas turbines and generators are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. We are a worldwide supplier of gas turbines for Integrated Gasification Combined Cycle (IGCC) applications, having provided gas turbines for a significant number of the world's operating IGCC plants. IGCC systems convert coal and other hydrocarbons into synthetic gas which, after cleanup, is used as the primary fuel for gas turbines in combined-cycle systems. IGCC systems produce fewer air pollutants compared with traditional pulverized coal power plants. We sell steam turbines and generators to the electric utility industry and to private industrial customers for cogeneration applications. Products also include portable and rental power plants. Nuclear reactors, fuel and support services for both new and installed boiling water reactors are also a part of this segment. We provide our customers with total solutions to meet their needs through a complete portfolio of aftermarket services, including equipment upgrades, contractual services agreements, repairs, equipment installation, monitoring and diagnostics, asset management and performance optimization tools, remote performance testing and Dry Low NOx (DLN) tuning. We continue to invest in advanced technology development that will provide more value to our customers and more efficient solutions that comply with today’s strict environmental regulations.
 
Worldwide competition for power generation products and services is intense. Demand for most power generation products and services is global and, as a result, is sensitive to the economic and political environment of each country in which we do business. Regional load growth requirements and demand side management are important factors. The availability of fuels and related prices have a large impact on demand.
 
Energy Financial Services offers structured equity, leveraged leasing, partnerships, project finance and broad-based commercial finance to the global energy and water industries. We operate in a highly competitive environment. Our competitors include banks, financial institutions, energy companies, and other finance and leasing companies. Competition is based on price, that is interest rates and fees, as well as deal structure and terms. As we compete globally, our success is sensitive to the economic and political environment of each country in which we do business.
 
Oil & Gas
 
Oil & Gas offers advanced technology turbomachinery products and services for the production, transportation, storage, refining, and distribution of oil and natural gas. We have leading technology in total pipeline integrity solutions including analysis and pipeline asset management.
 
Transportation
 
Transportation provides technology solutions for customers in a variety of industries including railroad, transit, mining, oil and gas, power generation, and marine. We serve customers in more than 100 countries. Our products include high horsepower diesel-electric locomotives as well as parts and services for locomotives, including locomotives manufactured by competitors.
 
With the launch of the Evolution Series™ locomotive, we created our most technologically advanced, most fuel-efficient, diesel locomotive, while meeting or exceeding the U.S. Environmental Protection Agency’s Tier II requirements. Commercial production of the Evolution Series™ locomotive began in January 2005.
 

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The GE suite of locomotive services offerings, designed to improve fleet efficiency and reduce operating expenses, includes repair services, locomotive enhancements, modernizations, and information-based services like remote monitoring and diagnostics. We provide train control products, railway management services, and signaling systems to increase service levels, optimize asset utilization, and streamline operations for railroad owners and operators. We deliver leading edge tools that improve asset availability and reliability, optimize network planning, and control network execution to plan. We also offer leading drive technology solutions to the mining, transit, marine and stationary, and drilling industries. Our motors operate in thousands of applications, from electrical drive systems for large haulage trucks used in the mining industry to transit cars and drilling rigs, and our engines are used for marine power as well as stationary power generation applications. We also provide gearing technology for critical applications such as wind turbines.
 
Water
 
Water offers productivity solutions for pure water including the supply of specialty chemicals, pumps, valves, filters and fluid handling equipment for improving the performance of water, wastewater and process systems including mobile treatment systems and desalination processes.
 
For information about orders and backlog, see page 40.
 
Industrial
 
Industrial (21.7%, 22.8% and 22.0% of consolidated revenues in 2005, 2004 and 2003, respectively) produces and sells products including consumer appliances, industrial equipment and plastics, and related services. We also finance business equipment for a wide variety of customer applications. During 2005, we made a number of acquisitions, the most significant of which was Edwards Systems Technology.
 
Our operations are located in North America, Europe, Asia and South America.
 
Consumer & Industrial
 
Consumer & Industrial sells products characterized by high volume and relatively low unit prices. Our products share several characteristics - competitive design, efficient manufacturing and effective distribution and service. Strong global competition rarely permits premium pricing, so cost control, including productivity, is key. Despite pricing pressures on many of our products, we also invest in the development of differentiated, premium products that are more profitable. While some Consumer & Industrial products are primarily directed to consumer applications (major appliances, for example), and some primarily to industrial applications (switchgear, for example), others are directed to both markets (lighting, for example).
 
We sell and service major home appliances including refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, and residential water systems for filtration, softening and heating. Brands are Monogram®, GE Profile™, GE®, and Hotpoint®.
 

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We manufacture certain products, and also source finished product and component parts from third-party global manufacturers. A large portion of our appliances sales are through a variety of retail outlets for replacement of installed units. Residential building contractors installing units in new construction are our second major U.S. channel. We offer the largest manufacturer’s service organization in the appliances industry, providing in-home repair, extended service plans, warranty administration and risk management services. We also manufacture and sell approximately 6,000 different lamp products for commercial, industrial and consumer markets, including full lines of incandescent, halogen, fluorescent, high-intensity discharge, light-emitting diode, automotive and miniature products.
 
Consumer & Industrial also provides integrated electrical equipment and systems used to distribute, protect and control energy and equipment. We manufacture and distribute electrical distribution and control products including transformers, meters, relays, circuit breakers, panel boards and general purpose controls that are used to distribute and manage power in a variety of residential, commercial, consumer and industrial applications. In addition, we design and manufacture motors and control systems used in end-industrial and consumer products such as heating, ventilation and air conditioning, dishwashers, and clothes washers and dryers. We also provide customer-focused solutions centered on the delivery and control of electric power, and market a wide variety of commercial lighting systems and lighting for aircraft, automotive and other transportation applications, front and rear video projection, medical, architectural, fiber optic, stage, studio, nightclub and theater applications.
 
The aggregate level of economic activity in markets for such products and services generally lags overall economic slowdowns as well as subsequent recoveries. In the United States, industrial markets are undergoing significant structural changes reflecting, among other factors, increased international competition and pressures to modernize productive capacity.
 
We also have a network of electrical product supply houses selling electrical products and parts, fasteners, voice and datacom parts, lighting equipment and supplies from GE and other leading manufacturers. Our business serves electrical contractors, industrial and commercial users, engineer constructors, original equipment manufacturers, utilities and the aerospace industry.
 
Equipment Services
 
Equipment Services helps customers manage, finance and operate a wide variety of business equipment worldwide. We provide rentals, leases, sales and asset management services of commercial and transportation equipment, including tractors, trailers, railroad rolling stock, modular space units, intermodal shipping containers and, primarily through an associated company, marine containers. Our operations are conducted in highly competitive markets. Economic conditions, geographic location, pricing and equipment availability are important factors in this business. Future success will depend upon our ability to maintain a large and diverse customer portfolio, optimize asset mix, maximize asset utilization and manage credit risk. In addition, we seek to understand our customers and to meet their needs with unique, efficient and cost effective product and service offerings.
 
Plastics
 
Plastics manufactures and sells high-performance plastics used by compounders, molders, and major original equipment manufacturers for use in a variety of applications, including fabrication of automotive parts, computer enclosures, compact disks and optical-quality media, major appliance parts, telecommunications equipment and construction materials. Our business has a significant operating presence around the world and we participate in numerous manufacturing and distribution joint ventures.
 

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Our business environment is characterized by technological innovation and heavy capital investment. To remain competitive we must maintain emphasis on efficient manufacturing process implementation and devote significant resources to market and application development. Our competitors include large, technology-driven suppliers of the same, as well as other functionally similar, materials. Our business is cyclical and is sensitive to variations in price and to the effects of supply/demand factors on the cost of raw materials such as benzene, cumene and methanol. Competition is affected by availability of manufacturing capacity and anticipation of new product or material performance requirements. Our application development, often in association with our existing or potential customers, and associated technology assistance have added additional market demand. Product and manufacturing process patents establish barriers to entry in many product lines.
 
Other
 
Our Industrial business sells structured products, silicones and high-purity quartzware. Market opportunities are created by substituting many of these products for other materials, thereby providing our customers with productivity through improved material performance at lower system costs. We sell these materials to a diverse, worldwide customer base, mainly manufacturers. Our business has a significant operating presence around the world and we participate in numerous manufacturing and distribution joint ventures.
 
We also offer protection and productivity solutions to some of the most pressing issues that industries face: safe facilities, plant automation and sensing applications in the operating environment. From home to industry to national security, our technology covers the full spectrum of security solutions, including card access systems, high-tech video monitoring, intrusion and smoke detection, real estate and property control, and explosives and narcotics detection. We are an industry leader in the design and manufacture of sensing elements, devices, instruments and systems that enable customers to monitor, protect, control and ensure the safety of their critical applications. Other products include precision sensors for temperature flow rate, pressure, humidity, gas, infrared and ultrasonic applications; high-quality handheld and portable field calibrators; stand-alone measurement instrumentation; and systems that provide the end-to-end solutions necessary to validate or certify vital commercial and industrial processes. We deliver automation hardware and software designed to help users reduce costs, increase efficiency and enhance profitability through a diverse array of capabilities and products, including controllers, embedded systems, advanced software, motion control, computer numerical controls, operator interfaces, industrial computers, and lasers.
 
Our products and services are sold to a diverse worldwide commercial and residential customer base in the transportation, industrial, pharmaceutical and healthcare markets. Our business environment is characterized by technological innovation and market growth. Our competitors include technology-driven suppliers of the same, as well as other functionally equivalent products and services.
 

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Healthcare
 
Healthcare (10.1%, 10.0% and 9.0% of consolidated revenues in 2005, 2004 and 2003, respectively) manufactures, sells and services a wide range of medical equipment including equipment for magnetic resonance (MR), computed tomography (CT), positron emission tomography (PET) imaging, x-ray, patient monitoring, diagnostic cardiology, nuclear imaging, ultrasound, bone densitometry, anesthesiology and oxygen therapy, neonatal and critical care, and therapy. In April 2004, we acquired Amersham plc, a world leader in medical diagnostics and life sciences. Products include diagnostic imaging agents used in medical scanning procedures, protein separations products including chromotography purification systems used in the manufacture of bio-pharmaceuticals, and high-throughput systems for applications in genomics, proteomics and bioassays. We sell product services to hospitals, medical facilities, and pharmaceutical and research companies worldwide. Our product services include remote diagnostic and repair services for medical equipment manufactured by GE and by others, as well as computerized data management and customer productivity services.
 
We compete with a variety of U.S. and non-U.S. manufacturers and services operations. Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competition for these products and services. Throughout the world, we play a critical role in delivering new technology to improve patient outcomes and productivity tools to help control healthcare costs.
 
For information about orders and backlog, see page 41.
 
Our headquarters are in Chalfont St. Giles, United Kingdom and our operations are located in North America, Europe, Asia, Australia and South America.
 

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NBC Universal
 
NBC Universal, Inc. (NBC Universal) (9.8%, 9.5% and 6.1% of consolidated revenues in 2005, 2004 and 2003, respectively) was formed in May 2004 upon the combination of NBC with Vivendi Universal Entertainment LLLP and certain related assets. NBC Universal is principally engaged in the broadcast of network television services to affiliated television stations within the United States; the production of live and recorded television programs; the production and distribution of motion pictures; the operation, under licenses from the U.S. Federal Communications Commission (FCC), of television broadcasting stations; the ownership of several cable/satellite networks around the world; the operation of theme parks; and investment and programming activities in multimedia and the Internet. The NBC Television Network is one of four major U.S. commercial broadcast television networks and serves 230 affiliated stations within the United States. Telemundo is a leading U.S. Spanish-language commercial broadcast television network. At December 31, 2005, we owned and/or operated 30 VHF and UHF television stations including those located in Birmingham, AL; Los Angeles, CA; San Diego, CA; Hartford, CT; Miami, FL; Chicago, IL; New York, NY; Raleigh-Durham, NC; Columbus, OH; Philadelphia, PA; Providence, RI; Dallas, TX; and Washington, DC. Broadcasting operations of the NBC Television Network, the Telemundo network, and the company’s owned stations are subject to FCC regulation. Our operations include investment and programming activities in cable television, principally through USA Network, Bravo, CNBC, Sci Fi Channel, MSNBC, CNBC Europe, CNBC Asia Pacific, and entertainment channels across Europe and Latin America; equity investments in Arts and Entertainment, The History Channel, the Sundance Channel, ValueVision Media, Inc.; and a non-voting interest in Paxson Communications Corporation. We have secured exclusive United States television rights to the 2006, 2008, 2010 and 2012 Olympic Games.
 
NBC Universal’s broadcast ratings and advertising revenue are affected by viewer demographics and the availability of other entertainment choices. In addition, recent technological advances like personal video recorders offer personal entertainment through new media, introducing additional uncertainty to future revenue sources. Other technologies enable copying content, increasing the risk of content piracy, particularly in international markets where the intellectual property laws may not be clear or strictly applied.
 
Our headquarters are in New York, New York and our operations are located in North America, Europe and Asia.
 
Commercial Finance
 
Commercial Finance (13.7%, 14.5% and 14.9% of consolidated revenues in 2005, 2004 and 2003, respectively) offers a broad range of financial services worldwide. We have particular mid-market expertise and offer loans, leases and other financial services to customers, including manufacturers, distributors and end-users for a variety of equipment and major capital assets. These assets include industrial-related facilities and equipment; commercial and residential real estate; vehicles; corporate aircraft; and equipment used in many industries, including the construction, manufacturing, telecommunications and healthcare industries.
 
During 2005, we made a number of acquisitions, the most significant of which were the Transportation Financial Services Group of CitiCapital; the Inventory Finance division of Bombardier Capital; Antares Capital Corp., a unit of Massachusetts Mutual Life Insurance Co.; and ING’s portion of Heller AG.
 

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We operate in a highly competitive environment. Our competitors include commercial banks, investment banks, leasing companies, financing companies associated with manufacturers, and independent finance companies. Competition related to our lending and leasing operations is based on price, that is interest rates and fees, as well as deal structure and terms. Profitability is affected not only by broad economic conditions that affect customer credit quality and the availability and cost of capital, but also by successful management of credit risk, operating risk and market risks such as interest rate and currency exchange risks. Success requires high quality risk management systems, customer and industry specific knowledge, diversification, service and distribution channels, strong collateral and asset management knowledge, deal structuring expertise and the ability to reduce costs through technology and productivity.
 
Our headquarters are in Stamford, Connecticut with offices throughout North America, South America, Europe, Australia and Asia.
 
Capital Solutions
 
Capital Solutions offers a broad range of financial services worldwide, and has particular mid-market expertise, offering loans, leases, inventory finance and other financial services to customers, including manufacturers, dealers and end-users for a variety of equipment and major capital assets. These assets include retail facilities; vehicles; corporate aircraft; and equipment used in many industries, including the construction, transportation, technology, and manufacturing industries.
 
Real Estate
 
Real Estate operates globally, both directly and through joint ventures. Our Real Estate business finances, with both equity and loan structures, the acquisition, refinancing and renovation of office buildings, apartment buildings, retail facilities, industrial properties, parking facilities and franchise properties. Our typical Real Estate loans are intermediate term, may be either senior or subordinated, fixed or floating-rate, and are secured by existing income-producing commercial properties. Our originations of low loan-to-value loans are conducted for term securitization within one year. We invest in, and provide restructuring financing for, portfolios of mortgage loans, limited partnerships and tax-exempt bonds.
 
Consumer Finance
 
Consumer Finance (12.9%, 11.7% and 11.3% of consolidated revenues in 2005, 2004 and 2003, respectively) offers credit and deposit products and services to consumers, retailers, brokers and auto dealers in over 50 countries. We offer a broad range of financial products, including private-label credit cards; bank cards; Dual Cards™; corporate travel and purchasing cards; personal loans; auto loans; leases and inventory financing; residential mortgages; home equity loans; debt consolidation loans; current and savings accounts and insurance products related to consumer finance offerings for customers on a global basis.
 
In 2005, as part of our continued global expansion, we made a number of acquisitions, the most significant of which was a 25.5 percent voting stake in Garanti Bank, a full service bank in Turkey.
 

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Our operations are subject to a variety of bank and consumer protection regulations, including regulations controlling data privacy. Further, a number of countries have ceilings on rates chargeable to consumers in financial service transactions. We are subject to competition from various types of financial institutions including commercial banks, leasing companies, consumer loan companies, independent finance companies, manufacturers’ captive finance companies, and insurance companies. Industry participants compete on the basis of price, servicing capability, promotional marketing, risk management, and cross selling. The markets in which we operate are also subject to the risks from fluctuations in retail sales, interest and currency exchange rates, and the consumer’s capacity to repay debt.
 
Our headquarters are in Stamford, Connecticut and our operations are located in North America, South America, Europe, Australia and Asia.
 
Discontinued Operations
 
On November 18, 2005, we announced that we had entered into an agreement with Swiss Reinsurance Company (Swiss Re) to sell the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions. The transaction is expected to close in the second quarter of 2006, subject to regulatory approvals and customary closing conditions.
 
In May 2004, we completed the initial public offering of Genworth, our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations. Throughout 2005, we continued to reduce our ownership in Genworth, currently at 18%. We intend to continue to dispose of our remaining shares in 2006, subject to market conditions.
 
We reported both the portions of GE Insurance Solutions described above and Genworth as discontinued operations for all periods presented.
 
Geographic Data, Exports from the U.S. and Total Global Operations
 
Geographic data (based on the location of the Company operation supplying goods or services and including exports from the U.S. to unaffiliated customers) are reported in note 26 to the consolidated financial statements on page 127.
 
Additional financial data about our exports from the U.S. and total global operations are provided on pages 45 and 46.
 
Orders Backlog
 
See pages 40, 41 and 58 for information about our backlog of unfilled orders.
 
Research and Development
 
Total expenditures for research and development were $3,425 million in 2005. Total expenditures were $3,091 million in 2004 and $2,656 million in 2003. Of these amounts, $2,741 million in 2005 was GE-funded ($2,443 million in 2004 and $2,103 million in 2003); and $684 million in 2005 was funded by customers ($648 million in 2004 and $553 million in 2003), principally the U.S. government. Infrastructure’s Aviation business accounts for the largest share of GE’s research and development expenditures from both GE and customer funds. Healthcare and Infrastructure’s Energy business also made significant expenditures of GE and customer research and development funds.
 

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Environmental Matters
 
Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws.
 
We are involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to $0.1 billion in each of the last two years. We presently expect that such remediation actions will require average annual expenditures in the range of $0.2 billion to $0.3 billion over the next two years.
 
The U.S. Environmental Protection Agency (EPA) ruled in February 2002 that approximately 150,000 pounds of polychlorinated biphenyls (PCBs) must be dredged from a 40-mile stretch of the upper Hudson River in New York State. On October 6, 2005, GE and the U.S. Environmental Protection Agency (EPA) entered into and filed in the U.S. District Court for the Northern District of New York a consent decree that, subject to approval of that court, represents a comprehensive framework for implementation of the EPA’s 2002 decision to dredge PCB-containing sediments in the upper Hudson River. The dredging will be performed in two phases with an intervening peer review of performance after phase 1. Under this consent decree, we have committed up to $0.1 billion to reimburse the EPA for its past and future project oversight costs and agreed to perform the first phase of dredging. We further committed that, subject to future agreement with the EPA about completion of dredging after completion of phase 1 and the peer review, we will be responsible for further costs, including costs of phase 2 dredging. Our Statement of Financial Position as of December 31, 2005 and 2004, included liabilities for the estimated costs of this remediation.
 
See page 119 for additional discussion of environmental matters.
 
Employee Relations
 
At year-end 2005, General Electric Company and consolidated affiliates employed approximately 316,000 persons, of whom approximately 161,000 were employed in the United States. For further information about employees, see page 26.
 
Approximately 22,650 GE manufacturing and service employees in the United States are represented for collective bargaining purposes by a total of approximately 150 different local collective bargaining groups. A majority of such employees are represented by union locals that are affiliated with, and bargain in conjunction with, the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE/CWA-AFL-CIO). During 2003, General Electric Company negotiated four-year contracts with unions representing a substantial majority of those United States employees who are represented by unions. Most of these contracts will terminate in June 2007. NBC Universal is party to approximately 160 labor agreements covering about 3,500 staff employees (and a large number of freelance employees) in the United States. These agreements are with various labor unions, expire at various dates and are generally for a term ranging from three to five years.
 
Executive Officers
 
See Part III, Item 10 of this Form 10-K/A Report for information about Executive Officers of the Registrant.
 

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Other
 
Because of the diversity of our products and services, as well as the wide geographic dispersion of our production facilities, we use numerous sources for the wide variety of raw materials needed for our operations. We have not been adversely affected by the inability to obtain raw materials.
 
We own, or hold licenses to use, numerous patents. New patents are continuously being obtained through our research and development activities as existing patents expire. Patented inventions are used both within the Company and are licensed to others, but no operating segment is substantially dependent on any single patent or group of related patents.
 
Agencies of the U.S. Government constitute our largest single customer. An analysis of sales of goods and services as a percentage of revenues follows:
 
 
% of Consolidated Revenues
 
% of GE Revenues
 
2005
 
2004
 
2003
 
2005
 
2004
 
2003
                                   
Total sales to U.S. Government Agencies
2
%
 
2
%
 
3
%
 
3
%
 
4
%
 
4
%
Infrastructure segment defense-related sales
2
   
2
   
2
   
3
   
3
   
3
 
 
 
GE is a trademark and service mark of General Electric Company; NBC is a trademark and service mark of NBC Universal, Inc.; and MSNBC is a trademark and service mark of MSNBC Cable, LLC.
 
The Company’s Internet address is www.ge.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available, without charge, on our website, www.ge.com/en/company/investor/secfilings.htm, as soon as reasonably practicable after they are filed electronically with the SEC. Copies are also available, without charge, from GE Corporate Investor Communications, 3135 Easton Turnpike, Fairfield, CT 06828.
 
 
Item 1A. Risk Factors
 
The following discussion of risk factors contains “forward-looking statements,” as discussed in Item 1. These risk factors may be important to understanding any statement in this Annual Report on Form 10-K/A or elsewhere. The following information should be read in conjunction with Management’s Discussion and Analysis (MD&A), and the consolidated financial statements and related notes in this report.
 
Our businesses routinely encounter and address risks, some of which will cause our future results to be different - sometimes materially different - than we presently anticipate. Discussion about the important operational risks that our businesses encounter can be found in the MD&A section in Item 7. and in the business descriptions in Item 1. of this Form 10-K/A. Below, we have described our present view of certain important strategic risks. Our reactions to material future developments as well as our competitors’ reactions to those developments will determine our future results.
 

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Our global growth is subject to a number of economic, political and regulatory risks
 
We conduct our operations in virtually every part of the world. Global economic and regulatory developments affect businesses such as ours in many ways. Operations are subject to the effects of global competition. Particular local jurisdiction risks include regulatory risks arising from local laws and from local liquidity regulations, including risks of not being able to retrieve assets. Our global business is affected by local economic environments, including inflation, recession and currency volatility. Political changes, some of which may be disruptive, can interfere with our supply chain, our customers and all of our activities in a particular location. While some of these risks can be hedged using derivatives or other financial instruments and some are insurable, such attempts to mitigate these risks are costly and not always successful.
 
Our credit ratings are important to our cost of capital
 
The major debt agencies routinely evaluate our debt and have given their highest debt ratings to us. One of our strategic objectives is to maintain these “Triple A” ratings as they serve to lower our borrowing costs and facilitate our access to a variety of lenders. Failure to maintain our Triple A debt rating could adversely affect our cost of funds and related margins.
 
The disposition of businesses that do not fit with our evolving strategy can be highly uncertain
 
We will continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives. Our decisions to sell Genworth and GE Insurance Solutions are recent examples of disposition decisions. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic objectives, or we may dispose of a business at a price or on terms which are less than we had anticipated. In addition, there is a risk that we sell a business whose subsequent performance exceeds our expectations, in which case our decision would have potentially sacrificed enterprise value. Correspondingly, we may be too optimistic about a particular business’s prospects, in which case we may be unable to find a buyer at a price acceptable to us and therefore may have potentially sacrificed enterprise value.
 
 
Item 1B. Unresolved Staff Comments
 
Not applicable.
 
 
Item 2. Properties
 
Manufacturing operations are carried out at approximately 216 manufacturing plants located in 35 states in the United States and Puerto Rico and at 237 manufacturing plants located in 40 other countries.
 
 
Item 3. Legal Proceedings
 
In January 2005, the Boston District Office of the U.S. Securities and Exchange Commission (SEC) informed us that it had commenced an investigation and requested that GE and GE Capital voluntarily provide certain documents and information with respect to the use of hedge accounting for derivatives by us and GE Capital. The SEC Staff advised us in August 2005 that the SEC had issued a formal order of investigation in connection with this matter, which we believe to be a common step in the process in such matters. We and GE Capital have continued to voluntarily provide documents and information to the SEC Staff and we are cooperating fully with its investigation.
 

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On June 14, 2005, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York seeking documents relating to finite risk insurance. The subpoena is general in nature. GE received a similar subpoena from the Northeast Regional Office of the SEC on April 29, 2005. We are cooperating fully with the SEC and the U.S. Attorney’s Office.
 
On October 6, 2005, GE and the U.S. Environmental Protection Agency (EPA) entered into and filed in the U.S. District Court for the Northern District of New York a consent decree that, subject to approval of that court, represents a comprehensive framework for implementation of the EPA’s 2002 decision to dredge PCB-containing sediments in the upper Hudson River. The dredging will be performed in two phases with an intervening peer review of performance after phase 1. Under this consent decree, we have committed up to $111 million to reimburse the EPA for its past and future project oversight costs and agreed to perform the first phase of dredging. We further committed that, subject to future agreement with the EPA about completion of dredging after completion of phase 1 and the peer review, we will be responsible for further costs, including costs of phase 2 dredging. Our Statement of Financial Position as of December 31, 2005, included liabilities for our estimates of the future costs of this remediation.
 
 
Item 4. Submission of Matters to a Vote of Security Holders
 
Not applicable.
 
 
Part II
 
 
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
With respect to “Market Information”, in the United States, GE common stock is listed on the New York Stock Exchange (its principal market) and on the Boston Stock Exchange. GE common stock also is listed on The London Stock Exchange and on Euronext Paris. Trading prices, as reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and dividend information follow:
 
 
Common stock market price
 
Dividends
(In dollars)
High
 
Low
 
declared
           
2005
         
Fourth quarter
$36.34
 
$32.67
 
$.25
Third quarter
35.78
 
32.85
 
.22
Second quarter
37.34
 
34.15
 
.22
First quarter
36.89
 
34.95
 
.22
           
2004
         
Fourth quarter
$37.75
 
$32.65
 
$.22
Third quarter
34.53
 
31.42
 
.20
Second quarter
33.49
 
29.55
 
.20
First quarter
34.57
 
28.88
 
.20
 
         

 
As of January 31, 2006, there were about 646,000 shareowner accounts of record.
 

(24)



Period(a)
 
Total number
of shares
purchased(a)(b)
 
Average
price paid
per share
 
Total number of
shares purchased as
part of our share
repurchase program(c)
 
Approximate dollar
value of shares that
may yet be purchased
under our share
repurchase program
(Shares in thousands)
                                   
2005
                                 
October
   
34,008
     
$33.84
     
28,737
           
November
   
18,663
     
$35.48
     
11,853
           
December
   
45,911
     
$35.63
     
43,339
           
Total
   
98,582
     
$34.99
     
83,929
     
$
19.7 billion
 
                                   

(a)
Information is presented on a fiscal calendar basis, consistent with our quarterly financial reporting.
 
(b)
This category includes 14,653 thousand shares repurchased from our various benefit plans, primarily the GE Savings and Security Program (the S&SP). Through the S&SP, a defined contribution plan with 401(k) features, we repurchase shares resulting from changes in investment options by plan participants.
 
(c)
This balance represents the number of shares that were repurchased through the 2004 GE Share Repurchase Program as modified by the GE Board in November 2005 (the Program) under which we were authorized to repurchase up to $25 billion of Company common stock through 2008. The Program is flexible and shares are acquired with a combination of borrowings and free cash flow from the public markets and other sources, including GE Stock Direct, a stock purchase plan that is available to the public. As major acquisitions or other circumstances warrant, we modify the frequency and amount of share repurchases under the Program.

 
Item 6. Selected Financial Data
 
The selected financial data set forth in this Item 6 have been restated to reflect adjustments to our consolidated financial statements and other financial information contained in our Annual Report on Form 10-K for the year ended December 31, 2005, originally filed with the U.S. Securities and Exchange Commission (SEC) on March 3, 2006. The following selected financial data should be read in conjunction with our restated financial statements and the related Notes to Consolidated Financial Statements.
 
Information below is divided into two tables, each with three sections: upper portion - consolidated data; middle portion - GE data that reflect various conventional measurements for such enterprises; and lower portion - GECS data that reflect key information pertinent to financial services businesses. The first table reflects the “as reported” financial data; the second table sets forth the “as restated” financial data for that information affected by the restatement.
 



(25)




(In millions; per-share amounts in dollars)
2005
 
2004
 
2003
 
2002
 
2001
 
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES - AS REPORTED
 
Revenues
$
149,702
   
$
134,481
   
$
112,886
   
$
113,856
   
$
107,558
 
Earnings from continuing operations before accounting changes
 
18,275
   
16,285
   
13,766
   
15,798
   
12,948
 
Earnings (loss) from discontinued operations, net of taxes
 
(1,922
)
 
534
   
2,057
   
(616
)
 
1,130
 
Earnings before accounting changes
 
16,353
   
16,819
   
15,823
   
15,182
   
14,078
 
Cumulative effect of accounting changes
 
-
   
-
   
(587
)
 
(1,015
)
 
(287
)
Net earnings
 
16,353
   
16,819
   
15,236
   
14,167
   
13,791
 
Dividends declared
 
9,647
   
8,594
   
7,759
   
7,266
   
6,555
 
Return on average shareowners’ equity(a)
 
17.6
%
 
17.6
%
 
19.6
%
 
27.2
%
 
24.7
%
Per share
                             
Earnings from continuing operations before accounting changes - diluted
$
1.72
 
$
1.56
 
$
1.37
 
$
1.58
 
$
1.29
 
Earnings (loss) from discontinued operations - diluted
 
(0.18
)
 
0.05
   
0.20
   
(0.06
)
 
0.11
 
Earnings before accounting changes - diluted
 
1.54
   
1.61
   
1.57
   
1.51
   
1.40
 
Cumulative effect of accounting changes - diluted
 
-
   
-
   
(0.06
)
 
(0.10
)
 
(0.03
)
Net earnings - diluted
 
1.54
   
1.61
   
1.51
   
1.41
   
1.37
 
Earnings from continuing operations before accounting changes - basic
 
1.73
   
1.57
   
1.37
   
1.59
   
1.30
 
Earnings (loss) from discontinued operations - basic
 
(0.18
)
 
0.05
   
0.21
   
(0.06
)
 
0.11
 
Earnings before accounting changes - basic
 
1.55
   
1.62
   
1.58
   
1.52
   
1.42
 
Cumulative effect of accounting changes - basic
 
-
   
-
   
(0.06
)
 
(0.10
)
 
(0.03
)
Net earnings - basic
 
1.55
   
1.62
   
1.52
   
1.42
   
1.39
 
Dividends declared
 
0.91
   
0.82
   
0.77
   
0.73
   
0.66
 
Stock price range
 
37.34-
   
37.75-
   
32.42-
   
41.84-
   
52.90-
 
   
32.67
   
28.88
   
21.30
   
21.40
   
28.25
 
Year-end closing stock price
 
35.05
   
36.50
   
30.98
   
24.35
   
40.08
 
Total assets of continuing operations
 
626,586
   
618,241
   
503,610
   
441,768
   
373,550
 
Total assets
 
673,342
   
750,507
   
647,828
   
575,236
   
495,012
 
Long-term borrowings
 
212,281
   
207,871
   
170,309
   
138,570
   
77,818
 
Shares outstanding - average (in thousands)
 
10,569,805
   
10,399,629
   
10,018,587
   
9,947,113
   
9,932,245
 
Shareowner accounts - average
 
634,000
   
658,000
   
670,000
   
655,000
   
625,000
 
Employees at year end
                             
United States
 
161,000
   
165,000
   
155,000
   
161,000
   
158,000
 
Other countries
 
155,000
   
142,000
   
150,000
   
154,000
   
152,000
 
Total employees
 
316,000
(b)
 
307,000
   
305,000
   
315,000
   
310,000
 
GE DATA - AS REPORTED
                             
Short-term borrowings
$
1,127
 
$
3,409
 
$
2,555
 
$
8,786
 
$
1,722
 
Long-term borrowings
 
9,081
   
7,625
   
8,388
   
970
   
787
 
Minority interest
 
5,806
   
7,701
   
1,079
   
1,028
   
948
 
Shareowners’ equity
 
109,354
   
110,821
   
79,631
   
64,079
   
55,000
 
Total capital invested
$
125,368
 
$
129,556
 
$
91,653
 
$
74,863
 
$
58,457
 
Return on average total capital invested(c)
 
16.4
%
 
16.0
%
 
17.7
%
 
25.8
%
 
24.9
%
Borrowings as a percentage of total capital invested(d)
 
8.1
%
 
9.0
%
 
11.9
%
 
13.0
%
 
4.3
%
Working capital(e)
$
8,399
 
$
8,328
 
$
5,282
 
$
3,821
 
$
(2,398
)
Additions to property, plant and equipment
 
2,812
   
2,427
   
2,158
   
2,386
   
2,876
 
GECS DATA - AS REPORTED
                             
Revenues
$
59,297
 
$
52,894
 
$
42,978
 
$
40,345
 
$
39,998
 
Earnings from continuing operations before accounting changes
 
9,141
   
7,853
   
5,931
   
5,291
   
4,406
 
Earnings (loss) from discontinued operations, net of taxes
 
(1,922
)
 
534
   
2,057
   
(616
)
 
1,130
 
Earnings before accounting changes
 
7,219
   
8,387
   
7,988
   
4,675
   
5,536
 
Cumulative effect of accounting changes
 
-
   
-
   
(339
)
 
(1,015
)
 
(12
)
Net earnings
 
7,219
   
8,387
   
7,649
   
3,660
   
5,524
 
Shareowner’s equity
 
50,815
   
54,292
   
45,759
   
37,302
   
28,766
 
Minority interest
 
2,248
   
4,902
   
5,115
   
4,445
   
4,267
 
Total borrowings
 
362,069
   
355,501
   
316,593
   
267,014
   
236,449
 
Ratio of debt to equity at GE Capital
 
7.09:1
   
6.46:1
   
6.63:1
   
6.46:1
   
7.21:1
 
Total assets of continuing operations
$
493,849
 
$
486,238
 
$
410,653
 
$
356,352
 
$
304,011
 
Total assets
 
540,605
   
618,504
   
554,871
   
489,820
   
425,473
 


(26)



(In millions; per-share amounts in dollars)
 
2005
(Restated)
   
2004
(Restated)
   
2003
(Restated)
   
2002
(Restated
   
2001
(Restated
 
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES - AS RESTATED
 
Revenues
$
150,242
   
$
134,999
   
$
113,421
   
$
111,967
   
$
107,054
 
Earnings from continuing operations before accounting changes
 
18,633
   
16,626
   
14,091
   
14,629
   
12,620
 
Earnings (loss) from discontinued operations, net of taxes
 
(1,922
)
 
534
   
2,057
   
(616
)
 
1,130
 
Earnings before accounting changes
 
16,711
   
17,160
   
16,148
   
14,013
   
13,750
 
Net earnings
 
16,711
   
17,160
   
15,561
   
12,998
   
13,463
 
Return on average shareowners’ equity(a)
 
17.8
%
 
17.9
%
 
20.0
%
 
25.2
%
 
24.1
%
Per share
                             
Earnings from continuing operations before accounting changes - diluted
$
1.76
 
$
1.59
 
$
1.40
 
$
1.46
 
$
1.26
 
Earnings before accounting changes - diluted
 
1.57
   
1.64
   
1.60
   
1.40
   
1.37
 
Net earnings - diluted
 
1.57
   
1.64
   
1.54
   
1.30
   
1.34
 
Earnings from continuing operations before accounting changes - basic
 
1.76
   
1.60
   
1.41
   
1.47
   
1.27
 
Earnings before accounting changes - basic
 
1.58
   
1.65
   
1.61
   
1.41
   
1.38
 
Net earnings - basic
 
1.58
   
1.65
   
1.55
   
1.31
   
1.36
 
GE DATA - AS RESTATED
                             
Shareowners’ equity
 
109,351
   
110,908
   
79,662
   
63,979
   
55,019
 
Total capital invested
$
125,366
 
$
129,644
 
$
91,685
 
$
74,763
 
$
58,477
 
Return on average total capital invested(c)
 
16.6
%
 
16.2
%
 
18.1
%
 
24.0
%
 
24.3
%
Borrowings as a percentage of total capital invested(d)
 
8.1
%
 
9.0
%
 
11.9
%
 
13.0
%
 
4.3
%
GECS DATA - AS RESTATED
                             
Revenues
$
59,837
 
$
53,412
 
$
43,513
 
$
38,456
 
$
39,494
 
Earnings from continuing operations before accounting changes
 
9,499
   
8,194
   
6,256
   
4,122
   
4,078
 
Earnings before accounting changes
 
7,577
   
8,728
   
8,313
   
3,506
   
5,208
 
Net earnings
 
7,577
   
8,728
   
7,974
   
2,491
   
5,196
 
Shareowner’s equity
 
50,812
   
54,379
   
45,790
   
37,202
   
28,785
 
Total assets of continuing operations
 
493,828
   
486,348
   
410,659
   
356,134
   
304,031
 
Total assets
 
540,584
   
618,614
   
554,877
   
489,602
   
425,493
 

Transactions between GE and GECS have been eliminated from the consolidated information.
(a)
Return on Average Shareowners’ Equity - Earnings from continuing operations before accounting changes divided by average total shareowners’ equity, excluding effects of discontinued operations (on an annual basis, calculated using a five-point average). Average total shareowners’ equity, excluding effects of discontinued operations, as of the end of each of the years in the five-year period ended December 31, 2005, is described in the Supplemental Information section of Item 7.
(b)
Excludes employees of Genworth in 2005 as a result of the third quarter deconsolidation.
(c)
Return on Average Total Capital Invested - For GE, earnings from continuing operations before accounting changes plus the sum of after-tax interest and other financial charges and minority interest, divided by the sum of the averages of total shareowners’ equity (excluding effects of discontinued operations), borrowings, mandatorily redeemable preferred stock and minority interest (on an annual basis, calculated using a five-point average). Average total shareowners’ equity, excluding effects of discontinued operations as of the end of each of the years in the five-year period ended December 31, 2005, is described in the Supplemental Information section of Item 7.
(d)
Borrowings as a Percentage of Total Capital Invested - For GE, the sum of borrowings and mandatorily redeemable preferred stock, divided by the sum of borrowings, mandatorily redeemable preferred stock, minority interest and total shareowners’ equity.
 
(e)
Working Capital - Sum of receivables from the sales of goods and services, plus inventories, less trade accounts payables and progress collections.



(27)




Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
2007 Restatement
 
As discussed in the explanatory note to this Form 10-K/A and in note 1 to our financial statements, we are restating financial statements and other financial information for the years 2005, 2004 and 2003, and financial information for the years 2002 and 2001, and for each of the quarters in the years 2005 and 2004. The restatement adjusts our accounting for interest rate swap transactions related to a portion of the commercial paper issued by General Electric Capital Corporation (GECC) and General Electric Capital Services, Inc. (GECS), each wholly-owned subsidiaries of GE, from January 1, 2001, the date we adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The restatement has no effect on our cash flows or liquidity, and its effects on our financial position at the ends of the respective restated periods are immaterial.
 
Interest rate swaps - agreements under which we pay a fixed rate of interest and receive a floating rate of interest on an agreed notional amount - are used in meeting our objective of managing interest rate risk related to our commercial paper program. Many of our financial assets - such as loans and leases - have long-term, fixed-rate yields, and funding them with proceeds of commercial paper would expose us to interest rate risk. Interest rate swaps are used to manage this risk. We use commercial paper in connection with interest rate swaps because that financing structure is highly effective at fixing interest rates, enabling us to match fixed rate assets with fixed rate funding (or “match funding”) provided by the hedged commercial paper. Consistent with our hedge documentation, we had measured and recognized hedge ineffectiveness each reporting period. We had never used the short-cut treatment provided for in SFAS 133 for any of these hedges.
 
The following table sets forth the effects of the error in accounting for interest rate swaps related to our commercial paper hedging program, more fully described beginning on page 3, on our previously reported earnings for the years 2001 through 2005, and each of the quarters in the years 2004 and 2005.
 

 
Increase (decrease) in
 
 
earnings from continuing operations
before accounting changes
 
(In millions)
 
2005
   
2004
   
2003
   
2002
   
2001
 
                               
Total adjustment
$
358
 
$
341
 
$
325
 
$
(1,169
)
$
(328
)
                               
Previously reported earnings from continuing
                             
operations before accounting changes
$
18,275
 
$
16,285
 
$
13,766
 
$
15,798
 
$
12,948
 
Percent variation from previously reported
                             
earnings from continuing operations
                             
before accounting changes
 
2.0
%
 
2.1
%
 
2.4
%
 
(7.4
)%
 
(2.5
)%
                               

 

(28)



(In millions)
Increase (decrease) in earnings from continuing operations(a)
 
 
2005
 
2004
 
Quarter
4th Qtr.
 
3rd Qtr.
 
2nd Qtr.
 
1st Qtr.
 
4th Qtr.
 
3rd Qtr.
 
2nd Qtr.
 
1st Qtr.
 
                                                 
Total adjustment
$
99
 
$
173
 
$
(139
)
$
225
 
$
105
 
$
(224
)
$
596
 
$
(136
)
                                                 
Previously reported
                                               
earnings from continuing
                                               
operations
$
5,772
 
$
4,569
 
$
4,372
 
$
3,562
 
$
5,718
 
$
3,941
 
$
3,658
 
$
2,968
 
Percent variation from
                                               
previously reported
                                               
earnings from continuing
                                               
operations
 
1.7
%
 
3.8
%
 
(3.2
)%
 
6.3
%
 
1.8
%
 
(5.7
)%
 
16.3
%
 
(4.6
)%
                                                 

(a)
See also note 30 to the Notes to Consolidated Financial Statements - Quarterly Information (Unaudited), as restated

 
Changes to our previously reported earnings detailed above reflect the volatility resulting from recognizing changes in the fair value of our commercial paper interest rate swaps immediately in earnings, rather than recording them in earnings over the remaining term of the hedging relationship. Values of these swaps move directly with changes in interest rates: increases in interest rates produce positive earnings effects from fair value gains on the interest rate swaps, as the amount of cash we receive on the swaps’ variable cash flow stream increases versus its fixed payment stream; similarly, negative earnings effects result from fair value losses on the swaps associated with decreases in interest rates as the amount of cash received on the swaps’ variable cash flow stream decreases versus its fixed payment stream. Interest rates generally trended downward during the period from 2001 to the present, explaining the slightly negative effect on earnings from this accounting error correction. However, interest rates were volatile within the years - for example increasing sharply in the second quarter of 2004 and first quarter of 2005, resulting in more pronounced positive earnings effects in those periods. As these swaps are used in match funding arrangements, which protect against the economic exposure to changes in interest rates, there are offsetting fair value changes associated with the related fixed rate assets. Because fair value changes related to fixed rate assets are not recognized in earnings under the current accounting model, the elimination of hedge accounting through correction of the error presents the current earnings effects of only one of two equal and offsetting components of the economic relationship.
 
The effects of these corrections resulted in a cumulative earnings decrease of $0.5 billion through December 31, 2005, all of which were related to interest rate swaps used in our commercial paper hedging program. Reversal of these cumulative adjustments will affect net earnings positively over the terms of the underlying interest rate swaps, but to a degree that we do not expect to be significant in any individual period given the terms of the arrangements and actions taken to eliminate the accounting volatility by modifying the documentation in a manner that will enable the swaps to qualify for hedge accounting effective January 1, 2007.
 
Operations
 
Our consolidated financial statements combine the industrial manufacturing, services and media businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).
 

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In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission (SEC) rules. For such measures, we have provided supplemental explanations and reconciliations in the Supplemental Information section.
 
We present Management’s Discussion of Operations in five parts: Overview of Our Earnings from 2003 through 2005, Global Risk Management, Segment Operations, Global Operations and Environmental Matters.
 
Overview of Our Earnings from 2003 through 2005
 
Our results over the last several years reflect the global economic environment in which we operate. During these years, the economy has grown, but at a rate that, in historic terms, has been relatively modest. Long-term interest rates have been stable. We also experienced a weaker, but recently strengthening, U.S. dollar, escalating energy costs and higher fossil fuel-related raw material prices. Market developments in two industries in which we operate-power generation and commercial aviation - also had significant effects on our results. As the following pages show, our diversification and risk management strategies enabled us to continue to grow revenues and earnings to record levels during this challenging time.
 
Of our six segments, Infrastructure (29% and 36% of consolidated three-year revenues and total segment profit, respectively) was one of the most significantly affected by the recent economic environment. Infrastructure’s Energy business was particularly affected by the period of unprecedented U.S. power industry demands that peaked in 2002. The return to normal demand levels was reflected in subsequent lower shipments of large heavy-duty gas turbine units. In 2003, we sold 175 such units, compared with 122 in 2004 and 127 in 2005. During these years we invested in other lines of power generation such as wind power and developed product services that we believe will position the Energy business well for continued growth in 2006 and beyond. We also continued to invest in market-leading technology and services at Aviation, Transportation and Water. We had 1,405 commercial aircraft on lease at December 31, 2005, an increase of 63 aircraft from last year. All of our aircraft were on lease at the end of 2005, and at that time we held $10.6 billion (list price) of multiple-year orders for various Boeing, Airbus and other aircraft, including 73 aircraft ($4.8 billion list price) scheduled for delivery in 2006, all under agreement to commence operations with commercial airline customers. Product services and sales of our Evolution Series locomotives continue to be strong.
 
Industrial (22% and 10% of consolidated three-year revenues and total segment profit, respectively) is particularly sensitive to economic conditions. Higher capacity, in combination with declining or weak volume growth in many of the industries in which it operates, resulted in increased competitive price pressures. The Consumer & Industrial business continued to grow through product innovation and its focus on high-end appliances. The Plastics business was hit particularly hard during these three years because of additional pressure from significant inflation in natural gas and certain raw materials such as benzene. Increased earnings at Plastics reflected improved product pricing.
 

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We have achieved strong growth in our Healthcare and NBC Universal segments with a combination of organic growth and strategic acquisitions. Healthcare (10% and 11% of consolidated three-year revenues and total segment profit, respectively) realized benefits of acquisitions of Amersham plc (Amersham) in 2004 and Instrumentarium in 2003, expanding the breadth of our product and services offerings to the healthcare industry, and positioning us well for continued growth. NBC Universal (9% and 13% of consolidated three-year revenues and total segment profit, respectively) has developed into a diversified world-class media company over the last several years as the combination of NBC with Vivendi Universal Entertainment LLLP (VUE) in 2004 followed successful acquisitions of Telemundo and Bravo in 2002. NBC Universal revenues and segment profit rose 14% and 21%, respectively, in 2005, and 88% and 28%, respectively, in 2004, largely on acquisitions. We expect the technology and business model for the entertainment media industry to continue to evolve in the coming years and believe that NBC Universal is well positioned to compete in this challenging environment.
 
Commercial Finance and Consumer Finance (together, 26% and 31% of consolidated three-year revenues and total segment profit, respectively) are large, profitable growth businesses in which we continue to invest with confidence. In a challenging economic environment, these businesses grew earnings by a combined $1.3 billion and $1.0 billion in 2005 and 2004, respectively. Commercial Finance and Consumer Finance have delivered strong results through solid core growth, disciplined risk management and successful acquisitions. The most significant acquisitions affecting Commercial Finance and Consumer Finance results in 2005 were the commercial lending business of Transamerica Finance Corporation; WMC Finance Co. (WMC), a U.S. wholesale mortgage lender; Australian Financial Investments Group (AFIG), a residential mortgage lender in Australia; and the Transportation Financial Services Group of CitiCapital. These acquisitions collectively contributed $1.9 billion and $0.2 billion to 2005 revenues and net earnings, respectively.
 
Overall, acquisitions contributed $9.6 billion, $12.3 billion and $5.4 billion to consolidated revenues in 2005, 2004 and 2003, respectively. Our consolidated net earnings in 2005, 2004 and 2003 included approximately $0.9 billion, $1.2 billion and $0.5 billion, respectively, from acquired businesses. We integrate acquisitions as quickly as possible. Only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses. Dispositions also affected our operations through lower revenues of $2.0 billion, $3.0 billion and $2.3 billion in 2005, 2004 and 2003, respectively. This resulted in lower earnings of $0.1 billion and $0.5 billion in 2005 and 2004, respectively, and higher earnings of $0.2 billion in 2003.
 
Significant matters relating to our Statement of Earnings are explained below.
 
INSURANCE EXIT. In 2005, we reduced our exposure to insurance in a disciplined fashion and our exit is now in sight.
 
·  
On November 18, 2005, we announced that we had entered into an agreement with Swiss Reinsurance Company (Swiss Re) to sell the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions. The transaction is expected to close in the second quarter of 2006, subject to regulatory approvals and customary closing conditions.
 
·  
In May 2004, we completed the initial public offering of Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations. Throughout 2005, we continued to reduce our ownership in Genworth, currently at 18%. We intend to continue to dispose of our remaining shares in 2006, subject to market conditions.
 

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We reported both the portions of GE Insurance Solutions described above and Genworth as discontinued operations for all periods presented. Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations simply as “revenues” and “earnings” throughout this Management’s Discussion and Analysis. Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated.
 
WE DECLARED $9.6 BILLION IN DIVIDENDS IN 2005. Per-share dividends of $0.91 were up 11% from 2004, following a 6% increase from the preceding year. In December 2005, our Board of Directors raised our quarterly dividend 14% to $0.25 per share. We have rewarded our shareowners with over 100 consecutive years of dividends, with 30 consecutive years of dividend growth, and our dividend growth for the past five years has significantly outpaced that of companies in the Standard & Poor’s (S&P) 500 stock index.
 
Except as otherwise noted, the analysis in the remainder of this section presents the results of GE (with GECS included on a one-line basis) and GECS. See the Segment Operations section for a more detailed discussion of the businesses within GE and GECS.
 
GE SALES OF PRODUCT SERVICES were $27.4 billion in 2005, a 9% increase over 2004. Increases in product services in 2005 and 2004 were widespread, led by continued strong growth at Infrastructure and Healthcare. Operating profit from product services was approximately $7.0 billion in 2005, up 14% from 2004, reflecting ongoing improvements at Infrastructure and Healthcare.
 
POSTRETIREMENT BENEFIT PLANS reduced pre-tax earnings by $1.7 billion, $1.2 billion and $0.2 billion in 2005, 2004 and 2003, respectively. Costs of our principal pension plans increased over the last three years primarily because of the effects of:
 
·  
Prior years investment losses which reduced pre-tax earnings by $0.5 billion, $0.6 billion and $0.4 billion in 2005, 2004 and 2003, respectively, and
 
·  
Lowering pension discount rates which reduced pre-tax earnings by $0.1 billion, $0.4 billion and $0.2 billion in 2005, 2004 and 2003, respectively.