notes to consolidated financial statements Our recorded assets and liabilities for pension plans are as follows: PREPAID PENSION ASSET (LIABILITY) Principal pension plans Other pension plans December 31 (In millions) 2006 2005 2006 2005 Funded status(a) $11,465 $ 5,765 $(2,599) $(2,884) Unrecognized prior service cost (b) 1,004 (b) 37 Unrecognized net actuarial loss (b) 8,445 (b) 2,046 Net amount recognized $11,465 $15,214 $(2,599) $ (801) Pension asset (liability) recorded in the Statement of Financial Position Prepaid pension asset $15,019 $17,853 $ 46 $ 114 Unfunded liabilities Due within one year (c) (106) (90) (49) (43) Due after one year (c) (3,448) (2,549) (2,596) (2,154) Intangible assets (b) 54 Shareowners’ equity (b) 1,228 Net amount recognized $11,465 $15,214 $(2,599) $ (801) Amounts recorded in shareowners’ equity Prior service cost $ 831 $ $ 15 $ Net actuarial loss 2,162 1,704 Total $ 2,993 $ $ 1,719 $ (a) Fair value of assets less PBO, as shown in the preceding tables. (b) Amounts recognized in shareowners’ equity in 2006 upon adoption of SFAS 158. See note 1. (c) For principal pension plans, represents the GE Supplementary Pension Plan liability. The estimated prior service cost and net actuarial loss for the principal pension plans that will be amortized from shareowners’ equity into pension cost in 2007 are $200 million and $700 million, respectively. For other pension plans, the estimated prior service cost and net actuarial loss to be amortized over the next fi scal year is $10 million and $160 million, respectively. Comparable amortized amounts in 2006, respectively, were $253 million and $729 million for principal pension plans and $5 million and $164 million for other pension plans. Estimated future benefit payments are as follows: ESTIMATED FUTURE BENEFIT PAYMENTS 2012– 2016 (In millions) 2007 2008 2009 2010 2011 Principal pension plans $2,500 $2,500 $2,550 $2,600 $2,600 $14,500 Other pension plans 325 300 300 325 350 1,875 Our labor agreements with various U.S. unions expire in June 2007, and we will be engaged in negotiations to attain new agreements. While results of the 2007 union negotiations cannot be predicted, our recent past negotiations have resulted in agreements that increased costs. Note 8 Provision for Income Taxes (In millions) 2006 2005 2004 GE Current tax expense $1,738 $3,037 $2,148 Deferred tax expense (benefi t) from temporary differences 842 (287) (175) 2,580 2,750 1,973 GECS Current tax expense 266 1,938 1,497 Deferred tax expense (benefi t) from temporary differences 1,108 (653) 226 1,374 1,285 1,723 CONSOLIDATED Current tax expense 2,004 4,975 3,645 Deferred tax expense (benefi t) from temporary differences 1,950 (940) 51 Total $3,954 $4,035 $3,696 GE and GECS file a consolidated U.S. federal income tax return. The GECS provision for current tax expense includes its effect on the consolidated return. Consolidated current tax expense includes amounts appli- cable to U.S. federal income taxes of $61 million, $2,543 million and $629 million in 2006, 2005 and 2004, respectively, and amounts applicable to non-U.S. jurisdictions of $1,738 million, $2,224 million and $2,522 million in 2006, 2005 and 2004, respectively. Consolidated deferred taxes related to U.S. federal income taxes were an expense of $1,723 million in 2006 and benefits of $137 million and $27 million in 2005 and 2004, respectively. Consolidated U.S. earnings from continuing operations before income taxes were $9,245 million in 2006, $10,918 million in 2005 and $9,597 million in 2004. The corresponding amounts for non-U.S.-based operations were $15,375 million in 2006, $11,778 million in 2005 and $10,700 million in 2004. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. We evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. See note 21 for details. We have not provided U.S. deferred taxes on cumulative earnings of non-U.S. affiliates and associated companies that have been reinvested indefinitely. These earnings relate to ongoing operations and, at December 31, 2006, were approximately $47 billion. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax lia- bility that would be payable if such earnings were not reinvested 84 ge 2006 annual report
notes to consolidated financial statements indefinitely. Deferred taxes are provided for earnings of non-U.S. affiliates and associated companies when we plan to remit those earnings. The American Jobs Creation Act of 2004 (the Act) allowed U.S. companies a one-time opportunity to repatriate non-U.S. earnings through 2005 at a 5.25% rate of tax rather than the normal U.S. tax rate of 35%, provided that certain criteria, including qualifi ed U.S. reinvestment of those earnings, were met. Available U.S. foreign tax credits related to the repatriation are reduced under provisions of the Act. Because the vast majority of our non-U.S. earnings have been permanently reinvested in active business operations, we repatriated only $1.2 billion of non-U.S. earnings. Because a U.S. tax provision at normal tax rates had been pro- vided on the majority of this amount, the result was a reduction of the 2005 GE and consolidated tax rates of approximately 0.5 percentage points. The U.S. Internal Revenue Service (IRS) is currently auditing GE’s consolidated 2000–2005 income tax returns. It is reasonably possible that both the 2000–2002 and 2003–2005 audit cycles will be completed during 2007. The effect of the completion of these audit cycles will depend on the result of the examinations. In addition, certain potential deficiency issues and refund claims remain unresolved for years prior to 2000. GE or consolidated affiliates are under audit in numerous state, local and non-U.S. jurisdictions. We believe that adequate provision has been made for all income tax uncertainties. A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate is provided below. RECONCILIATION OF U.S. FEDERAL STATUTORY INCOME TAX RATE TO ACTUAL INCOME TAX RATE Consolidated GE GECS 2006 2005 2004 2006 2005 2004 2006 2005 2004 U.S. federal statutory income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% Increase (reduction) in rate resulting from Inclusion of after-tax earnings of GECS in before-tax earnings of GE (15.8) (15.6) (15.4) Tax on global activities including exports (17.7) (15.8) (12.3) (7.7) (5.8) (5.8) (21.6) (21.7) (14.5) U.S. business credits (1.4) (1.3) (1.1) (0.4) (0.2) (2.1) (2.5) (2.3) IRS settlements of Lockheed Martin tax-free exchange/Puerto Rico subsidiary loss (3.4) (3.7) All other net 0.2 (0.1) (0.6) 0.5 0.3 1.1 (0.8) (18.9) (17.2) Actual income tax rate 16.1% 17.8% Note 9 Earnings Per Share Information 2006 2005 2004 (In millions per-share amounts in dollars) Diluted Basic Diluted Basic Diluted Basic CONSOLIDATED Earnings from continuing operations for per-share calculation (a) Earnings (loss) from discontinued operations for per-share calculation (b) $20,667 163 $20,666 163 $18,662 (1,961) $18,661 (1,950) $16,602 556 $16,601 559 Net earnings available for per-share calculation $20,830 $20,829 $16,701 $16,711 $17,158 $17,160 AVERAGE EQUIVALENT SHARES Shares of GE common stock outstanding Employee compensation-related shares, including stock options 10,359 35 10,359 10,570 41 10,570 10,400 45 10,400 Total average equivalent shares 10,394 10,359 10,611 10,570 10,445 10,400 PER-SHARE AMOUNTS Earnings from continuing operations Earnings (loss) from discontinued operations $ 1.99 0.02 $ 1.99 0.02 $ 1.76 (0.18) $ 1.77 (0.18) $ 1.59 0.05 $ 1.60 0.05 Net earnings per share $ 2.00 $ 2.01 $ 1.57 $ 1.58 $ 1.64 $ 1.65 (16.8) 18.2% (23.9) 11.1% (22.2) (24.4) (23.4) (23.1) 12.8% 10.6% 11.6% 11.9% (17.6) 17.4% (a) Included dividend equivalents of approximately $1 million in each of the three years ended December 31, 2006. (b) Included dilutive effects of subsidiary-issued stock-based awards of approximately $11 million in 2005 and $2 million in 2004. Earnings-per-share amounts are computed independently sum of per-share amounts from continuing operations and for earnings from continuing operations, earnings (loss) from discontinued operations may not equal the total per-share discontinued operations and net earnings. As a result, the amounts for net earnings. ge 2006 annual report 85
Previous Page Next Page