Record financial results for GE in second quarter 2005
GE Delivers Record Second Quarter 2005
Financial Results
17 July 2005
Fairfield, Conn, USA. GE achieved
record second-quarter earnings of $4.6 billion, 24% higher than second
quarter 2004, on 13% growth in revenues to $41.6 billion, the Company
announced on 15 July 2005. First-half cash flow from operating activities
(CFOA) of $8.0 billion rose 18%, with CFOA of GE's industrial businesses up
24%.
"GE is in tremendous shape," said GE Chairman and CEO Jeff Immelt. "GE is
a strong and consistent growth company with expanding returns and strong
cash flow. We are in the right businesses, benefiting from above-average
market growth, and we are now organized to serve our customers with a deep
and focused team. I'm very proud of our team's performance. We are confident
in our ability to deliver sustainable growth for our investors."
Healthcare increased total orders 11% over the second quarter 2004 to
$3.9 billion, with 16% growth in equipment orders to $2.5 billion, including
$400 million of computed tomography (CT) orders, driven by the LightSpeed(R)
Volume CT scanner, an Imagination Breakthrough.
Second Quarter 2005 Highlights
- Revenues up 13% to $41.6 billion, with 8% organic growth
- Earnings of $4.6 billion, up 24%
- Earnings per share (EPS) of $.44, up 22%
- Operating profit margin of 15.1%, up 1.6 points
- All 11 GE businesses deliver at least double-digit earnings growth
- First-half cash flow from operating activities (CFOA) up 18%,
industrial CFOA up 24%
- Full-year 2005 EPS target increased to $1.80-$1.83
"Our improved business fundamentals and solid execution resulted in all
of our businesses delivering at least double-digit earnings growth," Immelt
said. "Total orders for the quarter were up 13% over second quarter 2004,
and our backlog for major equipment orders grew 15% to $23 billion. Organic
growth for the quarter was on target at 8%, and revenues from our growth
initiatives in services and our new platforms grew 10% and 23%,
respectively. In addition, global revenues increased 20%. As a result, we
are further narrowing our EPS outlook to the high end of our original
guidance for the full year and now expect to deliver $1.80-$1.83, up 12-14%.
"We have aggressively executed a strategy to expand our margins and
sustain our earnings growth for the long term," Immelt said. "Our focus on
technical innovation is enabling us to bring to market advanced new products
such as the H System(TM) turbine, coal gasification, the GEnx(TM) jet
engine, the GE Evolution(TM) locomotive, and water desalination systems just
as we are entering a period of expanding global infrastructure development.
These long-lived products allow us to offer high-margin, multi-year service
agreements that will add substantially to our current services backlog of
more than $83 billion. We are also launching high-margin Healthcare,
Security and Consumer & Industrial products that can expand our share
position. Our simplification efforts will lower costs, generate cash for
investment in future growth, and make it easier for customers to do business
with us. These core initiatives position us to achieve consistent
double-digit earnings growth with expanding returns on capital in 2005 and
beyond."
Second Quarter 2005 financial highlights
As of July 5, 2005, GE's 11 businesses were reorganized into six
businesses. Second-quarter results in this press release are reported
according to the 11-business organization that was in effect during the
period. The Company will provide historical results on the new six-business
basis in September.
- Earnings were a record $4.647 billion, up 24% from last year's $3.751
billion. Earnings per share (EPS) grew 22% to $.44, compared with $.36
last year (up 16% excluding a previously announced SFAS 133-related
correction to second quarter 2004). All 11 GE businesses contributed at
least double-digit earnings growth. Operating profit margin of 15.1%
increased 1.6 percentage points over second quarter 2004.
- Revenues of $41.6 billion increased 13% from last year's $36.8
billion. Industrial sales increased 12% to $22.4 billion, reflecting the
impact of acquisitions and solid organic growth. Financial services
revenues of $19.0 billion were up 12% over last year. Organic revenue
growth was 8%.
- Cash generated from GE's operating activities in the first half of
2005 totaled $8.0 billion, up 18% from $6.8 billion last year,
reflecting a 24% increase in CFOA from industrial businesses.
Second Quarter 2005 business highlights
Healthcare
- Increased total orders 11% over second quarter 2004 to $3.9 billion,
with 16% growth in equipment orders to $2.5 billion, including $0.4
billion of computed tomography (CT) orders, driven by the LightSpeed(R)
Volume CT scanner, an Imagination Breakthrough.
- Launched GE Carestation(R), an Imagination Breakthrough that is the
first anesthesia system for the operating room to provide both a
patient's vital signs and a visual representation of the anesthetic
drugs administered during surgery.
- Announced joint research collaborations with Eli Lilly & Co. and Roche
aimed at advancing the diagnosis and treatment of Alzheimer's disease by
focusing on the beta-amyloid protein.
- Introduced the GE Discovery STE, a new molecular imaging system with
25 patents, which combines CT and positron emission tomography scanning
technology to help doctors detect and diagnose cancer, heart disease and
neurological disease earlier and more accurately.
- Launched the GE Innova(R) 2100IQ, a new cardiovascular imaging system
that will enhance clinicians' ability to diagnose and treat heart
disease and enable more precise placement of interventional devices such
as stents, balloons and filters.
- Launched AKTAxpress(TM) MAb and HiTrap(TM) MabSelect SuRe(TM), a new
solution for rapid purification of monoclonal antibodies, which are
increasingly important as therapies in the management of cancer and
chronic infectious diseases.
Transportation
- Received engine, locomotive and services orders in the quarter
totaling $3.5 billion, up $0.1 billion over second quarter last year.
- Increased penetration of Transportation's ecomagination(SM) products
with selection of the GEnx aircraft engine by two airlines to power new
aircraft and by Boeing for its proposed 747 Advanced program, which
represents more than $10 billion of potential revenues; orders for the
GE90-115B engine and the GE Evolution locomotive; and plans announced
during the quarter to develop a six-axle hybrid freight locomotive for
commercial launch in 2008.
- Shipped 193 GE Evolution locomotives and received orders for more than
250, bringing the Evolution backlog to more than 1,450 units; won orders
for 250 Evolution services contracts during the quarter, bringing the
total to more than 1,000.
- Received aircraft engine orders from Japan Airlines, EVA Airways,
Pakistan Airlines, Bombardier, China Airlines and Lan Chile; won engine
campaigns, either independently or through CFMI, a 50/50 joint company
with Snecma Moteurs of France, or the Engine Alliance, a 50/50 joint
venture with Pratt & Whitney, with seven airlines.
- Launched the OnPoint(SM) aircraft engines service program with a
20-year, up to $1.5 billion agreement with AirAsia covering the engines
on its new fleet of Airbus A320-200 aircraft.
Energy
- Signed new contractual service agreements totaling $1 billion,
including two agreements with advanced technology power plants in China.
- As part of GE's ecomagination initiative, launched the Arklow Wind
Park, GE's first offshore project with 3.6-megawatt wind turbines;
opened the U.K.'s largest onshore wind farm at Cefn Croes, Wales;
shipped 321 wind turbines during the quarter, triple the number shipped
in second quarter 2004; received orders for 255 1.5-megawatt wind
turbines; was selected to provide wind turbines to two wind farms in
China that will supply renewable power for the Beijing 2008 Olympic
Games.
- Enhanced the generating capacity of GE's H System, an ecomagination
product and the world's most efficient combined-cycle gas turbine
system, from a rating of 480 to 520 megawatts.
- Signed an agreement with NuStart Energy Development LLC to design and
seek an NRC license for a fail-safe passive nuclear reactor.
- Exceeded $1 billion in Oil & Gas orders, 33% higher than second
quarter 2004.
- Shipped 27 heavy-duty gas turbines from Greenville, S.C., and Belfort,
France, compared with 29 in the same period last year.
Infrastructure
- Expanded GE's portfolio of ecomagination products and services in the
Middle East-Africa region with the announcement of plans to build
Africa's largest seawater desalination plant, which will supply Algeria
with 200,000 cubic meters of water per day for potable, industrial and
agricultural use.
- Enhanced a strategic alliance with Pall Corporation aimed at the
development and sale of proprietary solutions featuring GE's advanced
reverse osmosis/nanofiltration systems and services and Pall's
high-performance microfiltration/ultrafiltration technologies.
- Received orders from the U.S. Transportation Security Administration
(TSA) for nearly $55 million of GE security equipment, including 43
advanced in-line explosives detection system machines and 19 GE
EntryScan(3) trace detection portals.
- Continued to broaden its security product portfolio and geographic
reach with the acquisition of VisioWave, a designer and manufacturer of
software and high-end hardware systems for digital video management,
control and transmission.
Commercial Finance
- Completed the $2.3 billion acquisition of Bombardier Capital's
inventory finance division, which provides floor plan financing for a
variety of power sports and marine equipment, recreational vehicles and
manufactured housing in the U.S. and Canada.
- Acquired ING's portion of Heller AG, Germany's leading factoring
company, bringing GE's ownership to 100% and strengthening its offerings
to mid-size European companies.
- Ended the quarter with none of Aviation Services' aircraft on the
ground out of an owned fleet of more than 1,300, and expanded Aviation
Services' passenger-to-freighter conversion program to include four
747-400Fs for EVA Airways of Taiwan.
- Agreed to acquire approximately $1 billion of aircraft assets,
including 380 corporate aircraft, from CIT Group Inc., expanding and
diversifying GE's customer base and creating new cross-selling
opportunities in the corporate aircraft segment.
- Added real estate assets and employees in Europe with the acquisitions
of HPE Hausbau Group of Germany and Fonciere Ariane of France.
Consumer Finance
- Formed a strategic alliance with Caja de Ahorros del Mediterraneo
(CAM), the third-largest regional savings bank in Spain, creating CAMGE
Financiera, which will provide products such as personal loans and
credit cards to Spanish consumers.
- Entered into an agreement to acquire a significant stake in BAC
International Bank Inc. (BAC), a privately held retail bank and credit
card issuer with 178 branches in six Central American countries,
creating the opportunity to deliver enhanced consumer credit products to
a rapidly growing market.
- Signed a five-year extension of its agreement with Tesco in Thailand
for the Lotus Dual Card and other Consumer Finance products.
- Signed two major co-branded card deals in India: one for the LG
Electronics Loyalty Card, India's first consumer durable retail card,
and the second with IRCTC.com (Indian State Railway), the fastest
growing website in Asia, for a co-branded card offering discounts on
online purchases.
NBC Universal
- Announced a six-year deal with the National Football League to begin
airing a primetime network television package in 2006, and signed John
Madden to announce the games.
- Continued the strong performance of cable entertainment, with USA
Network and Sci Fi Channel viewers among adults 25-54 up 7% and 11%
respectively, and with Bravo leading basic cable networks in primetime
concentration of upscale adults 25-54.
- Marked Today's 500th consecutive week in first place in homes and
total viewers, continuing a streak that began the week of December 11,
1995.
- Continued NBC's late-night leadership, with Jay Leno and Conan O'Brien
leading their competitors among adults 18-49 by 33 percent and 57
percent, respectively.
- Delivered the industry's strongest concentrations of adults 18-49 in
households with incomes above $75,000 for an unscripted series (The
Apprentice), a drama (The West Wing), and a comedy (The Office).
- Signed an agreement for Telemundo to produce short programming
segments for Wal-Mart Television Network, expanding Telemundo's reach
into the Hispanic marketplace.
- Ended the quarter with Universal Pictures' The Interpreter exceeding
$150 million in worldwide box office revenues and Universal Studios Home
Entertainment's Meet The Fockers ranked as the #1 DVD and video rental
title for the first half of 2005.
Advanced Materials
- Introduced two Advanced Materials products as ecomagination products:
flexible Noryl(TM) resin, for lighter-weight automotive wiring, and
Silwet(TM) Silicone Super Spreader, which helps farmers and
agribusinesses reduce fertilizer and insecticide use.
- Commissioned a state-of-the-art plant at Wuxi, China to meet local and
global demand for quartz tubing used in lighting products.
Consumer & Industrial
- Introduced new products, including the GE Profile SmartDispense
dishwasher, a GE ecomagination product with exclusive detergent
management capabilities, and the ceramic metal halide 20 watt Par 20
lamp, which won the LightFair award for best new High Intensity
Discharge product.
- Continued strong sales of high-end Monogram(R) and Profile(R)
appliances and achieved strong growth in sales of Ultra Fluorescent
lamps, a GE ecomagination product.
Equipment and Other Services
- Continued its international expansion, with strong Penske Logistics
revenue growth from multinational customers, TIP Europe's largest
European lease agreement to date, for more than 1,300 trailer units, and
Railcar Services' renewal of a contract for more than 4,000 containers
and chassis with key shipping partner TFM of Mexico.
- Won "Best Telematics Portable / Handheld Product" from Telematics
Update for an innovative handheld diagnostic tool developed for GE's
VeriWise(TM) asset intelligence product.
Insurance
- Achieved year-to-date client retention rate of 89% at GE Insurance
Solutions in an increasingly competitive market.
- Completed the sale of Medical Protective to Berkshire Hathaway's
Columbia Insurance Company for $825 million.
GE (NYSE: GE) is Imagination at Work -- a diversified technology, media
and financial services company focused on solving some of the world's
toughest problems. With products and services ranging from aircraft engines,
power generation, water processing and security technology to medical
imaging, business and consumer financing, media content and advanced
materials, GE serves customers in more than 100 countries and employs more
than 300,000 people worldwide. For more information, visit the company's Web
site at www.ge.com.
Caution concerning forward-looking statements
2005 results are preliminary and quarterly information is unaudited. 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 arise from the behavior of financial markets,
including fluctuations in interest rates and commodity prices, from future
integration of acquired businesses, from 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, from unanticipated loss development in our insurance businesses,
and from 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.
GENERAL ELECTRIC COMPANY
Condensed Statement of Earnings
Consolidated
---------------------
Second quarters ended June 30 2005 2004 V%
--------------------------------------- -------- -------- ---
Revenues
Sales of goods and services $22,989 $20,654
Earnings of GECS - -
GECS revenues from services 17,971 15,802
Other income 596 325
-------- --------
Total revenues 41,556 36,781 13%
-------- --------
Costs and expenses
Cost of sales, operating and
administrative expenses 26,688 24,611
Interest and other financial charges 3,897 2,784
Insurance losses and policyholder and
annuity benefits 3,696 3,743
Provision for losses on financing
receivables 958 1,004
Minority interest in net earnings of
consolidated affiliates 456 186
-------- --------
Total costs and expenses 35,695 32,328 10%
-------- --------
Earnings before income taxes 5,861 4,453
Provision for income taxes (1,214) (702)
-------- --------
Net earnings $4,647 $3,751 24%
======== ========
Per-share amounts
Diluted earnings per share $0.44 $0.36 22%
Total average equivalent shares 10,650 10,431 2%
Basic earnings per share $0.44 $0.36 22%
Total average equivalent shares 10,604 10,387 2%
Dividends declared per share $0.22 $0.20
Financial Services
GE (GECS)
----------------------- ---------------------
Second quarters ended
June 30 2005 2004 V% 2005 2004 V%
--------------------------------- -------- ----- ------- ------- -----
Revenues
Sales of goods and
services $22,408 $19,994 $664 $728
Earnings of GECS 2,299 1,523 - -
GECS revenues from
services - - 18,314 16,151
Other income 624 329 - -
-------- -------- ------- -------
Total revenues 25,331 21,846 16% 18,978 16,879 12%
-------- -------- ------- -------
Costs and expenses
Cost of sales, operating
and administrative
expenses 19,316 17,481 7,622 7,370
Interest and other
financial charges 336 49 3,714 2,851
Insurance losses and
policyholder and
annuity benefits - - 3,747 3,808
Provision for losses on
financing receivables - - 958 1,004
Minority interest in net
earnings of consolidated
affiliates 249 110 207 76
-------- -------- ------- -------
Total costs and
expenses 19,901 17,640 13% 16,248 15,109 8%
-------- -------- ------- -------
Earnings before
income taxes 5,430 4,206 2,730 1,770
Provision for
income taxes (783) (455) (431) (247)
-------- -------- ------- -------
Net earnings $4,647 $3,751 24% $2,299 $1,523 51%
======== ======== ======= =======
Dollar amounts and share amounts in millions; per-share amounts in
dollars; unaudited. Supplemental consolidating data are shown for "GE"
and "GECS." Transactions between GE and GECS have been eliminated from
the "consolidated" columns. See note 1 to the 2004 consolidated
financial statements at www.ge.com/annual04 for further information
about consolidation matters.
GENERAL ELECTRIC COMPANY
Condensed Statement of Earnings
Consolidated
---------------------
Six months ended June 30 2005 2004 V%
----------------------------------- -------- -------- ---
Revenues
Sales of goods and services $44,394 $37,764
Earnings of GECS - -
GECS revenues from services 35,975 32,147
Other income 913 462
-------- --------
Total revenues 81,282 70,373 16%
-------- --------
Costs and expenses
Cost of sales, operating and
administrative expenses 52,301 46,302
Interest and other financial charges 7,674 5,626
Insurance losses and policyholder and
annuity benefits 7,716 7,332
Provision for losses on financing
receivables 1,860 1,959
Minority interest in net earnings of
consolidated affiliates 771 270
-------- --------
Total costs and expenses 70,322 61,489 14%
-------- --------
Earnings before income taxes 10,960 8,884
Provision for income taxes (2,348) (1,767)
-------- --------
Net earnings $8,612 $7,117 21%
======== ========
Per-share amounts
Diluted earnings per share $0.81 $0.69 17%
Total average equivalent shares 10,643 10,325 3%
Basic earnings per share $0.81 $0.69 17%
Total average equivalent shares 10,599 10,279 3%
Dividends declared per share $0.44 $0.40
Financial Services
GE (GECS)
----------------------- ---------------------
Six months ended
June 30 2005 2004 V% 2005 2004 V%
-------------------------------- -------- ----- ------- ------- -----
Revenues
Sales of goods and
services $43,241 $36,674 $1,338 $1,304
Earnings of GECS 4,567 3,494 - -
GECS revenues from
services - - 36,621 32,760
Other income 954 468 - -
-------- -------- ------- -------
Total revenues 48,762 40,636 20% 37,959 34,064 11%
-------- -------- ------- -------
Costs and expenses
Cost of sales, operating
and administrative
expenses 37,636 32,161 15,170 14,657
Interest and other
financial charges 717 288 7,234 5,555
Insurance losses and
policyholder
and annuity benefits - - 7,806 7,432
Provision for losses on
financing receivables - - 1,860 1,959
Minority interest in net
earnings of consolidated
affiliates 435 148 336 122
-------- -------- ------- -------
Total costs and expenses 38,788 32,597 19% 32,406 29,725 9%
-------- -------- ------- -------
Earnings before
income taxes 9,974 8,039 5,553 4,339
Provision for income
taxes (1,362) (922) (986) (845)
-------- -------- ------- -------
Net earnings $8,612 $7,117 21% $4,567 $3,494 31%
======== ======== ======= =======
Dollar amounts and share amounts in millions; per-share amounts in
dollars; unaudited. Supplemental consolidating data are shown for "GE"
and "GECS." Transactions between GE and GECS have been eliminated from
the "consolidated" columns. See note 1 to the 2004 consolidated
financial statements at www.ge.com/annual04 for further information
about consolidation matters.
Summary of Operating Segments (unaudited)
General Electric Company and consolidated affiliates
Second Quarters Six Months
Ended June 30 Ended June 30
-------------------- --------------------
(Dollars in millions) 2005 2004 V% 2005 2004 V%
-------------------- --------------------
Revenues
Advanced Materials $2,253 $2,048 10 $4,480 $3,933 14
Commercial Finance 6,068 5,732 6 12,108 11,123 9
Consumer Finance 4,928 3,830 29 9,617 7,419 30
Consumer & Industrial 3,576 3,490 2 6,837 6,587 4
Energy 4,537 4,118 10 9,039 7,983 13
Equipment & Other Services 1,975 1,763 12 3,894 4,015 (3)
Healthcare 3,768 3,372 12 7,089 5,867 21
Infrastructure 1,232 862 43 2,197 1,638 34
Insurance 6,007 5,554 8 12,340 11,507 7
NBC Universal 3,858 2,867 35 7,459 4,449 68
Transportation 4,244 3,903 9 7,977 7,308 9
Corporate items and
eliminations (890) (758)(17) (1,755) (1,456)(21)
---------------- ----------------
Consolidated revenues $41,556 $36,781 13 $81,282 $70,373 16
================ ================
Segment profit (a)
Advanced Materials $258 $161 60 $533 $332 61
Commercial Finance 1,215 975 25 2,366 1,930 23
Consumer Finance 735 600 23 1,470 1,202 22
Consumer & Industrial 227 204 11 392 353 11
Energy 698 634 10 1,295 1,284 1
Equipment & Other Services 65 (105) F 64 (101) F
Healthcare 672 584 15 1,081 923 17
Infrastructure 168 134 25 315 247 28
Insurance 284 53 F 667 463 44
NBC Universal 979 768 27 1,688 1,162 45
Transportation 898 810 11 1,642 1,447 13
---------------- ----------------
Total segment profit 6,199 4,818 29 11,513 9,242 25
GE corporate items and
eliminations (433) (563) 23 (822) (915) 10
GE interest and other
financial charges (336) (49) U (717) (288) U
GE provision for income taxes (783) (455)(72) (1,362) (922)(48)
---------------- ----------------
Consolidated net earnings $4,647 $3,751 24 $8,612 $7,117 21
================ ================
(a) Segment profit always excludes the effects of principal
pension plans and accounting changes, and may exclude matters such as
charges for restructuring; rationalization and other similar expenses;
in-process research and development and certain other
acquisition-related charges; certain gains and losses from
dispositions; and litigation settlements or other charges,
responsibility for which precedes the current management team. Segment
profit excludes or includes interest and other financial charges and
segment income taxes according to how a particular segment management
is measured - excluded in determining operating profit for Advanced
Materials, Consumer & Industrial, Energy, Healthcare, Infrastructure,
NBC Universal, and Transportation, but included in determining segment
profit, which we refer to as "segment net earnings," for Commercial
Finance, Consumer Finance, Equipment & Other Services, and Insurance.
Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
(Dollars in billions)
Consolidated
-----------------------
Assets 6/30/05 12/31/04
--------- ----------
Cash & marketable securities $146.8 $150.9
Receivables 13.0 14.2
Inventories 10.5 9.8
GECS financing receivables - net 276.0 282.7
Property, plant & equipment - net 64.8 63.3
Investment in GECS - -
Goodwill & intangible assets 85.5 83.2
Other assets 143.8 146.4
--------- ----------
Total assets $740.4 $750.5
========= ==========
Liabilities and equity
Borrowings $365.5 $370.4
Insurance reserves 136.0 140.6
Other liabilities & minority
interest 126.5 128.7
Shareowners' equity 112.4 110.8
--------- ----------
Total liabilities and equity $740.4 $750.5
========= ==========
Financial Services
GE (GECS)
-------------------- -------------------
Assets 6/30/05 12/31/04 6/30/05 12/31/04
--------- --------- --------- ---------
Cash & marketable
securities $2.1 $3.6 $145.0 $147.5
Receivables 13.2 14.5 - -
Inventories 10.3 9.6 0.2 0.2
GECS financing
receivables - net - - 276.0 282.7
Property, plant &
equipment - net 16.2 16.8 48.5 46.6
Investment in GECS 55.7 54.3 - -
Goodwill & intangible
assets 57.3 54.7 28.1 28.5
Other assets 35.0 38.1 114.1 113.0
--------- --------- --------- ---------
Total assets $189.8 $191.6 $611.9 $618.5
========= ========= ========= =========
Liabilities and equity
Borrowings $11.4 $11.0 $355.4 $360.8
Insurance reserves - - 136.3 140.9
Other liabilities &
minority interest 66.0 69.8 64.5 62.5
Shareowners' equity 112.4 110.8 55.7 54.3
--------- --------- --------- ---------
Total liabilities and
equity $189.8 $191.6 $611.9 $618.5
========= ========= ========= =========
June 30, 2005 information is unaudited. Supplemental consolidating
data are shown for "GE" and "Financial Services (GECS)." Transactions
between GE and GECS have been eliminated from the "consolidated"
columns. See note 1 to the 2004 consolidated financial statements at
www.ge.com/annual04 for further information about consolidation
matters.
Financial Measures That Supplement GAAP
General Electric Company and consolidated affiliates
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 SEC rules. Specifically, we have referred to organic revenue
growth for the three months ended June 30, 2005, compared with the
three months ended June 30, 2004, and the increase in cash from
operating activities from our industrial businesses (or Industrial
CFOA) for the six months ended June 30, 2005, compared with the six
months ended June, 30 2004. We also referred to earnings per share
growth excluding a previously announced SFAS 133 - related correction
to second quarter 2004. The reasons we use these non-GAAP financial
measures and their reconciliation to their most directly comparable
GAAP financial measures - revenues and cash from operating activities
- follow.
(Dollars in millions, except per share amounts)
Three months
ended June 30
----------------------
2005 2004 V%
-------- -------- ---
GE consolidated revenues as reported $41,556 $36,781 13%
Less:
Effects of acquisitions, dispositions and
currency exchange rates 4,171 2,081
Insurance segment 6,007 5,554
-----------------
GE consolidated revenues excluding the effects
of acquisitions, dispositions, currency
exchange rates and Insurance (organic
revenues) $31,378 $29,146 8%
=================
Six months
ended June 30
----------------------
2005 2004 V%
-------- -------- ---
Cash from GE's operating activities as reported $8,027 $6,817 18%
Less: GECS dividends 1,839 1,842
-----------------
Cash from GE's operating activities excluding
dividends from GECS (Industrial CFOA) $6,188 $4,975 24%
=================
Three months
ended June 30
----------------------
2005 2004 V%
-------- -------- ---
GE earnings per share excluding a previously
announced SFAS 133 - related correction to
second quarter 2004 $0.44 $0.38 16%
Less: effect of SFAS 133 - related correction (0.02)
-----------------
GE earnings per share $0.44 $0.36 22%
=================
We believe that meaningful analysis of our financial performance
requires an understanding of the factors underlying that performance
and our judgments about the likelihood that particular factors will
repeat. In some cases, short-term patterns and long-term trends may be
obscured by large factors or events. For example, events or trends in
a particular segment may be so significant as to obscure patterns and
trends of our industrial or financial services businesses in total.
For this reason, we believe that investors may find it useful to see
our second quarter 2005 revenue growth without the effect of
acquisitions, dispositions and currency exchange rates, and without
the effect of our Insurance segment, whose revenues were adversely
affected by the changing economic environment and other factors in the
second quarter of 2004. Similarly, we believe that investors would
find it useful to compare our operating cash flow for the six months
ended June 30, 2005, to the operating cash flow for the six months
ended June 30, 2004, without the impact of GECS dividends, which can
vary from period-to-period. On May 6, 2005, GE filed amended financial
statements for certain prior years and interim periods, including
second quarter 2004, to reflect corrections in its accounting for
derivatives under SFAS 133. The correction had the effect of reducing
second quarter 2004 EPS from $.38 per share to $.36 per share. We are
providing the EPS comparison to the pre-correction basis because we
believe this reconciliation provides investors with a better
understanding of the second quarter 2005 earnings per share variance.
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