GE Reports Strong Fourth-Quarter and Full-Year Results for 2006

GE announced record full-year 2006 earnings from continuing operations of $20.7 billion or $1.99 per share, up 11% and 13%, respectively, from 2005. Full-year revenues from continuing operations were also a record $163.4 billion, up 10%, increasing 9% organically.


“With strong performances at Infrastructure,
Healthcare and the financial services businesses, GE delivered
double-digit growth in earnings and revenues for the quarter and the
year,” GE Chairman and CEO Jeff Immelt said. “NBC
Universal’s turnaround is advancing and
Industrial had a good year in spite of continued commodity inflation and
competitive challenges at Plastics. We completed the disposition of
Advanced Materials in the quarter at a favorable tax rate, which enabled
us to accelerate our comprehensive restructuring efforts.


“For the second straight year, we
strengthened our operating leverage and achieved our organic revenue
growth target. We expanded our operating profit margin 190 basis points
to 18.2% in the fourth quarter, and we increased ROTC 180 basis points
to 18.4% for the year,” Immelt said. “We
posted our eighth straight quarter of organic revenue growth of 2-3X GDP.


“Demand for our services and products
continues to grow globally. Our higher-margin services revenues grew 13%
for the quarter, and global revenues accounted for $78 billion of
revenues for the year, up from approximately $40 billion in 2000.


“We generated total cash flow from operating
activities (CFOA) of $24.6 billion in 2006, an increase of 14% over
2005. With this cash, we have invested in the businesses, increased the
quarterly dividend for the 31^st straight year
and purchased $8.1 billion of stock,” Immelt
said.


“We continue to execute on our strategy to
invest in leadership businesses. Our focus remains on building faster
growth, higher margin businesses. Since the beginning of the year, we
have announced $15 billion of acquisitions in fast growth platforms in
Oil & Gas, Healthcare and Aviation,”
Immelt said. “We continue to exit slower
growth and more volatile businesses, and we are currently reviewing the
potential disposition of our Plastics business.


“We still intend to execute on our $5-7
billion buyback plan for 2007. This buyback will be back-end loaded
after we complete our business development activity, and we are on track
to achieve our 20% ROTC goal by 2008.”


Restatement


GE today is also amending its 2005 Form 10-K to restate its financial
position and results of operations for the years 2001 through 2005. GE
is also amending its Forms 10-Q for each of the first three quarters of
2006 to restate related interim financial statements. The restatement
adjusts GE’s accounting for interest rate
swaps used to fix certain otherwise variable interest costs in a portion
of its financial services commercial paper program. The restatement is
based on a determination of the Office of Chief Accountant of the
Securities and Exchange Commission, following discussions with GE and
its auditors, that this commercial paper hedging program did not meet
the specificity requirement of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. Accounting issues concerning
this program had been referred to that Office in connection with a
previously-disclosed SEC investigation relating to derivatives
accounting. GE and its auditors had concluded that the company’s
accounting for the commercial paper hedging program satisfied the
requirements of SFAS 133.


Keith Sherin, Senior Vice President and CFO, said, “Our
commercial paper hedge positions were consistent with our risk
management policies and economic objectives. While we are disappointed
that our program did not meet the technical requirements of SFAS 133, we
are committed to the highest standards of controllership and
transparency and ensuring appropriate application of SFAS 133. We have
corrected our commercial paper hedge policies and documentation, and
related internal controls, as of January 1, 2007.”


The impact of the restatement is as follows:

• Cumulative earnings reduction of $343 million from 2001-2006
  


• Earnings reduction in 2001 and 2002, and earnings increase in 2003-2005
  


• Earnings increase of $130 million in 2006, adding $.01 to full year
  EPS. Only 1Q-3Q affected, with no impact on 4Q
  


• Slightly positive effect on earnings over the next 10+ years (life of
  program impact of the adjustment = zero)
  


• No effect on CFOA or liquidity
  

Highlights of Preliminary Full-Year and Fourth-Quarter 2006 Results
(Prior Periods Restated):


Full-Year earnings from continuing operations were a record $20.7
billion, up 11% from $18.7 billion in 2005. EPS from continuing
operations were $1.99, up 13% from last year’s
$1.76. Four of GE’s six businesses
contributed double-digit earnings growth for the year.


Full-year continuing revenues grew 10% to a record $163.4
billion. Industrial sales rose 10% to $99.1 billion, reflecting core
growth and the net effects of acquisitions. Financial services revenues
grew 11% over last year to $63.6 billion, reflecting core growth and the
net effects of acquisitions.


Fourth-quarter earnings from continuing operations were $6.6
billion, up 12% from $5.9 billion in fourth quarter 2005. EPS from
continuing operations were $.64 per share, up 14% from last year’s
$.56. Four of GE’s six businesses contributed
double-digit earnings growth.


Fourth-quarter continuing revenues were $44.6 billion, up 11%
from $40.3 billion in fourth quarter 2005. Industrial sales increased 6%
to $27.1 billion, primarily reflecting core growth. Financial services
revenues grew 16% over last year to $17.1 billion, reflecting core
growth and the effects of acquisitions.


Cash generated from GE’s operating
activities in 2006 totaled $24.6 billion, up 14% from $21.6 billion last
year, reflecting a $2.0 billion increase in GE Capital Services’
dividends, substantially all of which was proceeds from sales of
insurance businesses, and a 7% increase from the Industrial businesses.


Discontinued Operations for the fourth quarter was a $3 million
loss, which reflected the results of the sale of GE Life late in the
quarter, and final adjustments to the June sale of Insurance Solutions.
Accordingly, fourth-quarter net earnings were $6.6 billion ($.64 per
share) in 2006 and $3.2 billion ($.30 per share) in 2005. For the year,
earnings from discontinued operations were $0.2 billion in 2006 compared
with a loss of $1.9 billion in 2005. Accordingly, total year net
earnings were $20.8 billion ($2.00 per share) in 2006 and $16.7 billion
($1.57 per share) in 2005.


2007 Outlook


“Looking ahead, the global environment
remains positive for GE. Our businesses are positioned to capitalize on
the drivers of the global economy – demand
for infrastructure around the world, growth in emerging markets,
favorable demographics, environmentally favorable technology, increasing
use of digital connections, and robust liquidity in the financial
markets,” Immelt said.


“We begin 2007 with a stronger set of
businesses, our key financial metrics heading in the right direction and
a cash position that gives us tremendous flexibility,”
Immelt said. “We see full-year 2007 EPS from
continuing operations of $2.18-2.23, an increase of 10-12% over
comparable 2006 earnings. For 1Q’07, we
expect to achieve EPS of $.43-.45, up 8-13%. Furthermore, we believe
that our strategic moves position GE for sustained growth in the future.”


GE will discuss preliminary fourth-quarter and full-year results on a
conference call and Webcast at 8:30 a.m. ET today. Call information is
available at www.ge.com/investor,
and related charts will be posted there prior to the call.