notes to consolidated financial statements STOCK OPTION ACTIVITY Weighted average Weighted remaining Aggregate average contractual intrinsic Shares exercise term value (in thousands) price (in years) (in millions) Outstanding at January 1, 2006(a) 259,116 $33.07 Granted 20,464 34.00 Exercised (35,335) 17.52 Forfeited (4,453) 32.46 Expired (7,372) 41.84 Outstanding at December 31, 2006 232,420 $35.25 4.7 $1,040 Exercisable at December 31, 2006 183,217 $35.93 3.8 $ 818 Options expected to vest 43,994 $32.61 8.1 $ 202 (a) Included 1.2 million options with a weighted average exercise price of $21.81 related to various acquisitions. We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during 2006, 2005 and 2004 amounted to $7.99, $8.87 and $8.33, respectively. The following assumptions were used in arriving at the fair value of options granted during 2006, 2005 and 2004, respectively: risk-free interest rates of 4.8%, 4.1% and 4.0% dividend yields of 2.9%, 2.5% and 2.5% expected volatility of 24%, 28% and 28% and expected lives of six years and two months, six years and six years. Risk free interest rates reflect the yield on zero-coupon U.S. Treasury securities. Expected dividend yields presume a set dividend rate. Expected volatilities are based on implied volatilities from traded options and historical volatility of our stock. The expected option lives are based on our historical experience of employee exercise behavior. The total intrinsic value of options exercised during 2006, 2005 and 2004 amounted to $1,312 million, $731 million and $958 million, respectively. As of December 31, 2006, there was $200 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of three years and 11 months. Cash received from option exercises during 2006, 2005 and 2004 was $622 million, $403 million and $459 million, respectively. RSU ACTIVITY Weighted average remaining Aggregate contractual intrinsic Shares term value (in thousands) (in years) (in millions) Outstanding at January 1, 2006 Granted Vested Forfeited 33,078 9,167 (4,879) (3,039) Outstanding at December 31, 2006 34,327 5.6 $1,277 RSUs expected to vest 30,972 4.9 $1,152 The fair value of each restricted stock unit is the market price of our stock on the date of grant. The weighted average grant- date fair value of RSUs granted during 2006, 2005 and 2004 amounted to $33.95, $34.72 and $32.47, respectively. The total intrinsic value of RSUs vested during 2006, 2005 and 2004 amounted to $132 million, $90 million and $85 million, respec- tively. As of December 31, 2006, there was $535 million of total unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of four years and 11 months. PSU activity As of December 31, 2006, 1.4 million PSUs with a weighted average remaining contractual term of two years, an aggregate intrinsic value of $51 million and $18 million of unrecognized compensation cost were outstanding. Note 25 Supplemental Cash Flows Information Changes in operating assets and liabilities are net of acquisitions and dispositions of principal businesses. Amounts reported in the “Payments for principal businesses purchased” line in the Statement of Cash Flows is net of cash acquired and included debt assumed and immediately repaid in acquisitions. Amounts reported in the “All other operating activities” line in the Statement of Cash Flows consists primarily of adjustments to current and noncurrent accruals and deferrals of costs and expenses, adjustments for gains and losses on assets, increases and decreases in assets held for sale and adjustments to assets. Significant non-cash transactions include the following: In 2006, in connection with our sale of GE Insurance Solutions, Swiss Re assumed $1,700 million of debt, and GE received $2,238 million of newly issued Swiss Re common stock. See note 2. In 2005, NBC Universal acquired IAC/InterActiveCorp’s 5.44% common interest in VUE for a total purchase price that included $115 million of non-cash consideration, representing the fair value of future services to be performed by NBC Universal and in 2004, the issuance of GE common stock valued at $10,674 million in connection with the acquisition of Amersham and the issuance of NBC Universal common stock valued at $5,845 million in connection with the combination of NBC and VUE. 98 ge 2006 annual report
notes to consolidated financial statements Certain supplemental information related to GE and GECS cash flows is shown below. December 31 (In millions) 2006 2005 2004 GE NET DISPOSITIONS (PURCHASES) OF GE SHARES FOR TREASURY Open market purchases under share repurchase program Other purchases Dispositions $ (8,054) (2,458) 1,958 $ (5,024) (1,844) 2,024 $ (203) (1,689) 5,885 $ (8,554) $ (4,844) $ 3,993 GECS ALL OTHER OPERATING ACTIVITIES Net change in assets held for sale Amortization of intangible assets Realized gains on sale of investment securities Other $ (1,578) 627 (146) 1,056 $ 2,192 459 (377) (871) $ 84 519 (222) (548) $ (41) $ 1,403 $ (167) NET INCREASE IN GECS FINANCING RECEIVABLES Increase in loans to customers $(376,050) $(315,697) $(342,357) Principal collections from customers loans 300,150 267,728 305,846 Investment in equipment for financing leases (25,618) (23,508) (22,649) Principal collections from customers fi nancing leases 18,791 21,770 19,715 Net change in credit card receivables (25,790) (21,391) (20,651) Sales of financing receivables 67,471 54,144 44,816 $ (41,046) $ (16,954) $ (15,280) ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance activities $ (11,891) $ (8,825) $ (6,472) Dispositions and maturities of securities by insurance activities 11,635 10,792 8,922 Other assets investments (6,242) (919) (386) Other 943 (3,754) 2,092 $ (5,555) $ (2,706) $ 4,156 NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $ 1,237 $ 4,675 $ 3,940 Long-term (longer than one year) 86,026 60,176 53,641 Proceeds nonrecourse, leveraged lease 1,015 203 562 $ 88,278 $ 65,054 $ 58,143 REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $ (42,271) $ (38,132) $ (41,443) Long-term (longer than one year) (5,578) (10,746) (3,443) Principal payments nonrecourse, leveraged lease (1,404) (831) (652) $ (49,253) $ (49,709) $ (45,538) ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment contracts $ 16,418 $ 15,806 $ 11,170 Redemption of investment contracts (17,603) (16,934) (14,474) Other 11 $ (1,174) $ (1,128) $ (3,304) ge 2006 annual report 99
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