Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2006
 
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 its 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
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant’s telephone number, including area code) (203) 373-2211
 
_______________________________________________
(Former name, former address and former fiscal year,
if changed since last report)

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 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
 
There were 10,398,398,000 shares of common stock with a par value of $0.06 per share outstanding at March 31, 2006.
 




General Electric Company
 
Part I - Financial Information
 
Page
   
 
Item 1. Financial Statements
   
 
3
 
4
 
5
 
6
 
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
19
Item 4. Controls and Procedures
 
28
     
Part II - Other Information
   
     
Item 1. Legal Proceedings
 
29
Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
29
Item 6. Exhibits
 
30
 
31
 
Forward-Looking Statements
 
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.



Part I. Financial Information
 
Item 1. Financial Statements
 
Condensed Statement of Earnings
General Electric Company and consolidated affiliates
 
 
Three months ended March 31 (Unaudited)
 
 
Consolidated
 
GE
 
Financial
Services (GECS)
 
(In millions; per-share amounts in dollars)
2006
 
2005
 
2006
 
2005
 
2006
 
2005
 
                                     
Sales of goods
$
14,535
 
$
13,656
 
$
14,026
 
$
12,988
 
$
555
 
$
674
 
Sales of services
 
8,949
   
7,749
   
9,060
   
7,845
   
-
   
-
 
Other income
 
451
   
317
   
479
   
330
   
-
   
-
 
GECS earnings from continuing operations
 
-
   
-
   
2,270
   
1,863
   
-
   
-
 
GECS revenues from services
 
13,886
   
12,628
   
-
   
-
   
14,126
   
12,931
 
Total revenues
 
37,821
   
34,350
   
25,835
   
23,026
   
14,681
   
13,605
 
                                     
Cost of goods sold
 
11,656
   
10,606
   
11,188
   
9,977
   
513
   
635
 
Cost of services sold
 
6,005
   
4,936
   
6,117
   
5,032
   
-
   
-
 
Interest and other financial charges
 
4,361
   
3,671
   
384
   
381
   
4,107
   
3,414
 
Investment contracts, insurance losses and
                                   
insurance annuity benefits
 
749
   
827
   
-
   
-
   
805
   
866
 
Provision for losses on financing receivables
 
822
   
902
   
-
   
-
   
822
   
902
 
Other costs and expenses
 
9,037
   
8,848
   
3,396
   
3,311
   
5,723
   
5,690
 
Minority interest in net earnings of
                                   
consolidated affiliates
 
238
   
216
   
163
   
186
   
75
   
30
 
Total costs and expenses
 
32,868
   
30,006
   
21,248
   
18,887
   
12,045
   
11,537
 
                                     
Earnings from continuing operations
                                   
before income taxes
 
4,953
   
4,344
   
4,587
   
4,139
   
2,636
   
2,068
 
Provision for income taxes
 
(911
)
 
(784
)
 
(545
)
 
(579
)
 
(366
)
 
(205
)
Earnings from continuing operations
 
4,042
   
3,560
   
4,042
   
3,560
   
2,270
   
1,863
 
Earnings from discontinued operations, net of taxes
 
263
   
405
   
263
   
405
   
263
   
405
 
Net earnings
$
4,305
 
$
3,965
 
$
4,305
 
$
3,965
 
$
2,533
 
$
2,268
 
                                     
Per-share amounts
                                   
Per-share amounts - earnings from
                                   
continuing operations
                                   
Diluted earnings per share
$
0.39
 
$
0.33
                         
Basic earnings per share
$
0.39
 
$
0.34
                         
                                     
Per-share amounts - net earnings
                                   
Diluted earnings per share
$
0.41
 
$
0.37
                         
Basic earnings per share
$
0.41
 
$
0.37
                         
                                     
Dividends declared per share
$
0.25
 
$
0.22
                         

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.
 


Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
 
 
Consolidated
 
GE
 
Financial
Services (GECS)
 
(In millions; except share amounts)
3/31/06
 
12/31/05
 
3/31/06
 
12/31/05
 
3/31/06
 
12/31/05
 
                                     
Cash and equivalents
$
8,503
 
$
8,825
 
$
1,772
 
$
2,015
 
$
6,900
 
$
7,130
 
Investment securities
 
45,100
   
42,148
   
596
   
461
   
44,512
   
41,710
 
Current receivables
 
12,558
   
14,851
   
12,764
   
15,058
   
-
   
-
 
Inventories
 
11,364
   
10,474
   
11,203
   
10,315
   
161
   
159
 
Financing receivables - net
 
286,834
   
287,639
   
-
   
-
   
286,834
   
287,639
 
Other GECS receivables
 
14,360
   
14,332
   
-
   
-
   
18,855
   
18,625
 
Property, plant and equipment (including
                                   
equipment leased to others) - net
 
67,684
   
67,528
   
16,370
   
16,504
   
51,314
   
51,024
 
Investment in GECS
 
-
   
-
   
49,254
   
50,815
   
-
   
-
 
Intangible assets - net
 
82,955
   
81,630
   
59,141
   
57,839
   
23,814
   
23,791
 
All other assets
 
86,947
   
84,849
   
36,540
   
36,752
   
51,871
   
49,461
 
Assets of discontinued operations
 
58,512
   
61,066
   
-
   
-
   
58,512
   
61,066
 
Total assets
$
674,817
 
$
673,342
 
$
187,640
 
$
189,759
 
$
542,773
 
$
540,605
 
                                     
Short-term borrowings
$
153,200
 
$
158,156
 
$
2,112
 
$
1,127
 
$
151,593
 
$
157,672
 
Accounts payable, principally trade accounts
 
19,096
   
21,183
   
10,752
   
11,870
   
12,214
   
13,043
 
Progress collections and price adjustments accrued
 
4,354
   
4,456
   
4,354
   
4,456
   
-
   
-
 
Other GE current liabilities
 
21,181
   
21,042
   
21,199
   
21,059
   
-
   
-
 
Long-term borrowings
 
222,970
   
212,281
   
9,085
   
9,081
   
215,086
   
204,397
 
Investment contracts, insurance liabilities
                                   
and insurance annuity benefits
 
33,386
   
33,097
   
-
   
-
   
33,811
   
33,387
 
All other liabilities
 
38,661
   
39,966
   
23,020
   
23,273
   
15,738
   
16,787
 
Deferred income taxes
 
16,862
   
16,226
   
3,775
   
3,733
   
13,087
   
12,493
 
Liabilities of discontinued operations
 
49,476
   
49,527
   
-
   
-
   
49,702
   
49,763
 
Total liabilities
 
559,186
   
555,934
   
74,297
   
74,599
   
491,231
   
487,542
 
                                     
Minority interest in equity of consolidated affiliates
 
8,143
   
8,054
   
5,855
   
5,806
   
2,288
   
2,248
 
Common stock (10,398,398,000 and 10,484,268,000
                                   
shares outstanding at March 31, 2006 and
                                   
December 31, 2005, respectively)
 
669
   
669
   
669
   
669
   
1
   
1
 
Accumulated gains (losses) - net
                                   
Investment securities
 
1,159
   
1,831
   
1,159
   
1,831
   
1,049
   
1,754
 
Currency translation adjustments
 
2,272
   
2,532
   
2,272
   
2,532
   
2,007
   
2,287
 
Cash flow hedges
 
(549
)
 
(822
)
 
(549
)
 
(822
)
 
(507
)
 
(813
)
Minimum pension liabilities
 
(889
)
 
(874
)
 
(889
)
 
(874
)
 
(189
)
 
(179
)
Other capital
 
25,362
   
25,227
   
25,362
   
25,227
   
12,525
   
12,386
 
Retained earnings
 
99,808
   
98,117
   
99,808
   
98,117
   
34,368
   
35,379
 
Less common stock held in treasury
 
(20,344
)
 
(17,326
)
 
(20,344
)
 
(17,326
)
 
-
   
-
 
                                     
Total shareowners’ equity
 
107,488
   
109,354
   
107,488
   
109,354
   
49,254
   
50,815
 
                                     
Total liabilities and equity
$
674,817
 
$
673,342
 
$
187,640
 
$
189,759
 
$
542,773
 
$
540,605
 

The sum of accumulated gains (losses) on investment securities, currency translation adjustments, cash flow hedges and minimum pension liabilities constitutes “Accumulated nonowner changes other than earnings,” and was $1,993 million and $2,667 million at March 31, 2006, and December 31, 2005, respectively.
 
See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” March 31, 2006, data are unaudited. Transactions between GE and GECS have been eliminated from the “Consolidated” columns.
 


Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
 
 
Three months ended March 31 (Unaudited)
 
 
Consolidated
 
GE
 
Financial
Services (GECS)
 
(In millions)
2006
 
2005
 
2006
 
2005
 
2006
 
2005
 
                                     
Cash flows - operating activities
                                   
Net earnings
$
4,305
 
$
3,965
 
$
4,305
 
$
3,965
 
$
2,533
 
$
2,268
 
Earnings from discontinued operations
 
(263
)
 
(405
)
 
-
   
-
   
(263
)
 
(405
)
Adjustments to reconcile net earnings to cash
                                   
provided from operating activities
                                   
Depreciation and amortization of property,
                                   
plant and equipment
 
2,132
   
2,280
   
633
   
643
   
1,499
   
1,637
 
Earnings retained by GECS
 
-
   
-
   
871
   
(2,044
)
 
-
   
-
 
Deferred income taxes
 
311
   
(168
)
 
73
   
(1
)
 
238
   
(167
)
Decrease in GE current receivables
 
2,472
   
1,315
   
2,472
   
1,387
   
-
   
-
 
Increase in inventories
 
(878
)
 
(678
)
 
(876
)
 
(671
)
 
(2
)
 
(7
)
Decrease in accounts payable
 
(1,286
)
 
(1,583
)
 
(683
)
 
(1,032
)
 
(462
)
 
(850
)
Decrease in GE progress collections
 
(108
)
 
(102
)
 
(108
)
 
(102
)
 
-
   
-
 
Provision for losses on GECS financing receivables
 
822
   
902
   
-
   
-
   
822
   
902
 
All other operating activities
 
(2,089
)
 
2,188
   
25
   
745
   
(1,104
)
 
1,708
 
Cash from operating activities - continuing operations
 
5,418
   
7,714
   
6,712
   
2,890
   
3,261
   
5,086
 
Cash from operating activities - discontinued operations
 
91
   
1,210
   
-
   
-
   
91
   
1,210
 
Cash from operating activities
 
5,509
   
8,924
   
6,712
   
2,890
   
3,352
   
6,296
 
                                     
Cash flows - investing activities
                                   
Additions to property, plant and equipment
 
(2,984
)
 
(2,934
)
 
(853
)
 
(412
)
 
(2,131
)
 
(2,522
)
Dispositions of property, plant and equipment
 
1,158
   
1,811
   
-
   
-
   
1,113
   
1,814
 
Net decrease (increase) in GECS financing receivables
 
(3,063
)
 
750
   
-
   
-
   
(3,063
)
 
750
 
Payments for principal businesses purchased
 
(2,075
)
 
(7,300
)
 
(1,651
)
 
(2,669
)
 
(424
)
 
(4,631
)
All other investing activities
 
(199
)
 
866
   
346
   
586
   
(1,481
)
 
156
 
Cash used for investing activities - continuing operations
 
(7,163
)
 
(6,807
)
 
(2,158
)
 
(2,495
)
 
(5,986
)
 
(4,433
)
Cash from (used for) investing activities - discontinued operations
 
800
   
(359
)
 
-
   
-
   
800
   
(359
)
Cash used for investing activities
 
(6,363
)
 
(7,166
)
 
(2,158
)
 
(2,495
)
 
(5,186
)
 
(4,792
)
                                     
Cash flows - financing activities
                                   
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
(1,498
)
 
(3,270
)
 
1,054
   
503
   
(2,876
)
 
(3,675
)
Newly issued debt (maturities longer than 90 days)
 
24,623
   
23,722
   
43
   
14
   
24,583
   
23,677
 
Repayments and other reductions (maturities longer than 90 days)
 
(16,103
)
 
(21,219
)
 
(122
)
 
(342
)
 
(15,981
)
 
(20,877
)
Net dispositions (purchases) of GE treasury shares
 
(3,141
)
 
121
   
(3,141
)
 
121
   
-
   
-
 
Dividends paid to shareowners
 
(2,631
)
 
(2,336
)
 
(2,631
)
 
(2,336
)
 
(3,404
)
 
(224
)
All other financing activities
 
173
   
(592
)
 
-
   
-
   
173
   
(592
)
Cash from (used for) financing activities - continuing operations
 
1,423
   
(3,574
)
 
(4,797
)
 
(2,040
)
 
2,495
   
(1,691
)
Cash used for financing activities - discontinued operations
 
(249
)
 
(613
)
 
-
   
-
   
(249
)
 
(613
)
Cash from (used for) financing activities
 
1,174
   
(4,187
)
 
(4,797
)
 
(2,040
)
 
2,246
   
(2,304
)
                                     
Increase (decrease) in cash and equivalents
 
320
   
(2,429
)
 
(243
)
 
(1,645
)
 
412
   
(800
)
Cash and equivalents at beginning of year
 
11,801
   
15,328
   
2,015
   
3,155
   
10,106
   
12,367
 
Cash and equivalents at March 31
 
12,121
   
12,899
   
1,772
   
1,510
   
10,518
   
11,567
 
Less cash and equivalents of discontinued operations at March 31
 
3,618
   
3,504
   
-
   
-
   
3,618
   
3,504
 
Cash and equivalents of continuing operations at March 31
$
8,503
 
$
9,395
 
$
1,772
 
$
1,510
 
$
6,900
 
$
8,063
 

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and Financial Services (GECS) have been eliminated from the “Consolidated” columns.

 
Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended
March 31 (Unaudited)
 
(In millions)
2006
 
2005
 
             
Revenues
           
Infrastructure
$
10,152
 
$
9,374
 
Industrial
 
8,140
   
7,668
 
Healthcare
 
3,659
   
3,321
 
NBC Universal
 
4,482
   
3,601
 
Commercial Finance
 
5,484
   
5,072
 
Consumer Finance
 
5,090
   
4,689
 
Total segment revenues
 
37,007
   
33,725
 
Corporate items and eliminations
 
814
   
625
 
Consolidated revenues
$
37,821
 
$
34,350
 
             
Segment profit (a)
           
Infrastructure
$
1,703
 
$
1,540
 
Industrial
 
600
   
526
 
Healthcare
 
496
   
409
 
NBC Universal
 
654
   
709
 
Commercial Finance
 
1,174
   
926
 
Consumer Finance
 
836
   
735
 
Total segment profit
 
5,463
   
4,845
 
Corporate items and eliminations
 
(492
)
 
(325
)
GE interest and other financial charges
 
(384
)
 
(381
)
GE provision for income taxes
 
(545
)
 
(579
)
Earnings from continuing operations
 
4,042
   
3,560
 
Earnings from discontinued operations, net of taxes
 
263
   
405
 
Consolidated net earnings
$
4,305
 
$
3,965
 
             

(a)
 
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations 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 and balances; technology development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured - excluded in determining segment profit, which we refer to as “operating profit,” for Healthcare, NBC Universal and the industrial businesses of the Infrastructure and Industrial segments; included in determining segment profit, which we refer to as “net earnings,” for Commercial Finance, Consumer Finance, and the financial services businesses of the Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance) and the Industrial segment (Equipment Services).
 

 


Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. The accompanying condensed, consolidated financial statements represent the consolidation of General Electric Company and all companies that we directly or indirectly control, either through majority ownership or otherwise. See note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2005. That note discusses consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in the Annual Report on Form 10-K, “GE” represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis; GECS consists of General Electric Capital Services, Inc. and all of its affiliates; and “Consolidated” represents the adding together of GE and GECS with the effects of transactions between the two eliminated. We reclassified certain prior-period amounts to conform to the current period’s presentation. Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations.
 
2. The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.
 
3. At March 31, 2006, we classified GE Life, Genworth Financial, Inc. (Genworth) and most of GE Insurance Solutions Corporation (GE Insurance Solutions) as discontinued operations. Associated results of operations, financial position and cash flows are separately reported for all periods presented.
 
Planned sale of GE Life
 
In March 2006, we initiated a plan to sell GE Life, our U.K.-based life insurance operation. GE Life’s assets were $14,520 million at March 31, 2006; its first quarter 2006 revenues were $799 million; and its first quarter 2006 earnings were insignificant. We have provided for a pre-tax loss of $210 million ($175 million after tax or $0.02 per share) based on our best estimate of sales proceeds. We anticipate selling GE Life by March 31, 2007.
 
Planned sale of GE Insurance Solutions
 
Swiss Reinsurance Company (Swiss Re) has agreed to buy the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions for $8,500 million, including the assumption of $1,700 million of debt. On April 20, 2006, we and Swiss Re agreed that consideration, other than assumed debt, will consist of $2,400 million of newly issued Swiss Re common stock that we will be restricted from selling for 360 days and the remainder will consist of some combination of cash, immediately salable notes and mandatory convertible instruments. We presently expect this transaction to close in the second quarter of 2006, subject to regulatory approvals and customary closing conditions.
 


Completed sale of Genworth
 
In March 2006, we completed the sale of our remaining 18% investment in Genworth through a secondary public offering of 71 million shares of Class A Common Stock and direct sale to Genworth of 15 million shares of Genworth Class B Common Stock. As a result, we recognized a pre-tax gain of $516 million ($300 million after tax or $0.03 per share).
 
Summarized financial information for discontinued operations is set forth below. Gain on disposal included both actual (Genworth) and estimated (GE Life) effects.
 
 
Three months ended
March 31
 
(In millions)
2006
 
2005
 
             
Discontinued operations before disposal
           
Revenues from services
$
2,345
 
$
5,213
 
             
Earnings from discontinued operations before
           
minority interest and income taxes
$
179
 
$
698
 
Minority interest
 
-
   
99
 
Earnings from discontinued operations before income taxes
 
179
   
599
 
Income tax expense
 
(41
)
 
(280
)
Earnings from discontinued operations before disposal, net of taxes
$
138
 
$
319
 
             
Disposal
           
Gain on disposal before income taxes
$
306
 
$
156
 
Income tax expense
 
(181
)
 
(70
)
Gain on disposal, net of taxes
$
125
 
$
86
 
             
Earnings from discontinued operations, net of taxes
$
263
 
$
405
 

 



 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Assets
           
Cash and equivalents
$
3,618
 
$
2,976
 
Investment securities
 
35,023
   
37,633
 
Other GECS receivables
 
13,333
   
13,915
 
Other
 
6,538
   
6,542
 
Assets of discontinued operations
 
58,512
   
61,066
 
Eliminations
 
-
   
-
 
Total
$
58,512
 
$
61,066
 
             
Liabilities and equity
           
Investment contracts, insurance liabilities and
           
insurance annuity benefits
$
43,525
 
$
43,378
 
Other
 
6,177
   
6,385
 
Liabilities of discontinued operations
 
49,702
   
49,763
 
Eliminations
 
(226
)
 
(236
)
Total
$
49,476
 
$
49,527
 
             
Total accumulated nonowner changes other than earnings
$
65
 
$
652
 

 
4. GECS revenues from services are summarized in the following table.
 
 
Three months ended
March 31
 
(In millions)
2006
 
2005
 
             
Interest on loans
$
5,342
 
$
4,863
 
Operating lease rentals
 
2,915
   
2,757
 
Investment income
 
660
   
655
 
Fees
 
1,007
   
847
 
Financing leases
 
1,002
   
1,033
 
Premiums earned by insurance activities
 
491
   
553
 
Other income
 
2,709
   
2,223
 
Total
$
14,126
 
$
12,931
 

 


5. We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans include the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Other pension plans include the U.S. and non-U.S. pension plans whose pension assets or obligations exceeded $50 million. Smaller pension plans and other retiree benefit plans are not material individually or in the aggregate. The effect on operations of the pension and retiree benefit plans follows.
 
 
Principal
Pension Plans
 
Other
Pension Plans
 
 
Three months ended
March 31
 
Three months ended
March 31
 
(In millions)
2006
 
2005
 
2006
 
2005
 
                         
Expected return on plan assets
$
(952
)
$
(970
)
$
(98
)
$
(88
)
Service cost for benefits earned
 
366
   
325
   
83
   
73
 
Interest cost on benefit obligation
 
579
   
557
   
93
   
90
 
Prior service cost
 
58
   
62
   
1
   
2
 
Net actuarial loss recognized
 
188
   
81
   
39
   
31
 
Cost of pension plans
$
239
 
$
55
 
$
118
 
$
108
 

 
 
Principal
Retiree Health and
Life Insurance Plans
 
 
Three months ended
March 31
 
(In millions)
2006
 
2005
 
             
Expected return on plan assets
$
(32
)
$
(34
)
Service cost for benefits earned
 
54
   
53
 
Interest cost on benefit obligation
 
114
   
126
 
Prior service cost
 
74
   
75
 
Net actuarial loss recognized
 
18
   
18
 
Cost of principal retiree benefit plans
$
228
 
$
238
 

 


6. GE’s authorized common stock consists of 13,200,000,000 shares having a par value of $0.06 each. Information related to the calculation of earnings per share follows.
 
 
Three months ended March 31
 
 
2006
 
2005
 
(In millions; per-share amounts in dollars)
Diluted
 
Basic
 
Diluted
 
Basic
 
                         
Consolidated
                       
Earnings from continuing operations for
                       
per-share calculation(a)
$
4,042
 
$
4,042
 
$
3,560
 
$
3,560
 
Earnings from discontinued operations
                       
for per-share calculation(b)
 
263
   
263
   
403
   
405
 
Net earnings available for per-share calculation
$
4,305
 
$
4,305
 
$
3,963
 
$
3,965
 
                         
Average equivalent shares
                       
Shares of GE common stock outstanding
 
10,442
   
10,442
   
10,597
   
10,597
 
Employee compensation-related shares,
                       
including stock options
 
38
   
-
   
44
   
-
 
Total average equivalent shares
 
10,480
   
10,442
   
10,641
   
10,597
 
                         
Per-share amounts
                       
Earnings from continuing operations
$
0.39
 
$
0.39
 
$
0.33
 
$
0.34
 
Earnings from discontinued operations
$
0.03
 
$
0.03
 
$
0.04
 
$
0.04
 
Net earnings
$
0.41
 
$
0.41
 
$
0.37
 
$
0.37
 
                         

(a)
 
Including dividend equivalents.
 
(b)
Including dilutive effects of subsidiary-issued stock-based awards.

 
Earnings-per-share amounts are computed independently each quarter for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations does not always equal the total per-share net earnings for the respective quarters.
 
7. Inventories consisted of the following.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Raw materials and work in process
$
6,176
 
$
5,527
 
Finished goods
 
5,561
   
5,311
 
Unbilled shipments
 
280
   
333
 
   
12,017
   
11,171
 
Less revaluation to LIFO
 
(653
)
 
(697
)
Total
$
11,364
 
$
10,474
 

 


8. GECS financing receivables - net, consisted of the following.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Loans, net of deferred income
$
227,528
 
$
227,923
 
Investment in financing leases, net of deferred income
 
63,810
   
64,309
 
   
291,338
   
292,232
 
Less allowance for losses
 
(4,504
)
 
(4,593
)
Financing receivables - net
$
286,834
 
$
287,639
 

 
Included in the above are the financing receivables of consolidated, liquidating securitization entities as follows:
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Loans, net of deferred income
$
14,755
 
$
15,868
 
Investment in financing leases, net of deferred income
 
131
   
769
 
   
14,886
   
16,637
 
Less allowance for losses
 
(22
)
 
(22
)
Financing receivables - net
$
14,864
 
$
16,615
 

 
9. Property, plant and equipment (including equipment leased to others) - net, consisted of the following.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Original cost
$
112,457
 
$
111,733
 
Less accumulated depreciation and amortization
 
(44,773
)
 
(44,205
)
Property, plant and equipment - net
$
67,684
 
$
67,528
 

 
10. Intangible assets - net, consisted of the following.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Goodwill
$
71,002
 
$
69,611
 
Intangible assets subject to amortization
 
9,841
   
9,932
 
Indefinite-lived intangible assets(a)
 
2,112
   
2,087
 
Total
$
82,955
 
$
81,630
 
             

(a)
 
Indefinite-lived intangible assets principally comprised trademarks, tradenames and U.S. Federal Communications Commission licenses.
 

 


First quarter 2006 changes in goodwill balances follow.
 
(In millions)
Balance
1/1/06
 
Acquisitions/
purchase
accounting
adjustments
 
Currency
exchange
and other
 
Balance
3/31/06
 
                                 
Infrastructure
$
10,166
   
$
163
     
$
(14
)
 
$
10,315
 
Industrial
 
8,702
     
95
       
7
     
8,804
 
Healthcare
 
13,404
     
1,081
       
4
     
14,489
 
NBC Universal
 
17,534
     
10
       
-
     
17,544
 
Commercial Finance
 
10,621
     
85
       
(11
)
   
10,695
 
Consumer Finance
 
9,184
     
53
       
(82
)
   
9,155
 
Total
$
69,611
   
$
1,487
     
$
(96
)
 
$
71,002
 

 
The amount of goodwill related to new acquisitions recorded during the first quarter of 2006 was $1,277 million. The largest such acquisition was IDX Systems Corporation ($1,099 million), acquired by Healthcare. During 2006, we increased goodwill associated with previous acquisitions by $210 million; the largest such adjustment was an increase of $123 million associated with the 2005 acquisition of Ionics, Inc. by Infrastructure.
 
Intangible Assets Subject to Amortization
 
 
At
 
 
3/31/06
 
12/31/05
 
(In millions)
Gross
carrying
amount
 
Accumulated
amortization
 
Net
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
 
                                             
Patents, licenses and trademarks 
$
5,237
   
$
(1,484
)
 
$
3,753
 
$
5,311
   
$
(1,406
)
 
$
3,905
 
Capitalized software
 
5,738
     
(3,230
)
   
2,508
   
5,586
     
(3,059
)
   
2,527
 
All other
 
4,911
     
(1,331
)
   
3,580
   
4,737
     
(1,237
)
   
3,500
 
Total
$
15,886
   
$
(6,045
)
 
$
9,841
 
$
15,634
   
$
(5,702
)
 
$
9,932
 

 
Consolidated amortization expense related to intangible assets subject to amortization was $432 million and $363 million for the quarters ended March 31, 2006 and 2005, respectively.
 


11. GECS borrowings are summarized in the following table.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Short-term borrowings
           
             
Commercial paper
           
U.S.
           
Unsecured
$
61,724
 
$
67,643
 
Asset-backed(a)
 
8,157
   
9,267
 
Non-U.S.
 
24,870
   
20,456
 
Current portion of long-term debt(b)(c)
 
38,693
   
41,792
 
Other
 
18,149
   
18,514
 
Total
 
151,593
   
157,672
 
             
Long-term borrowings
           
             
Senior notes
           
Unsecured
 
192,239
   
180,546
 
Asset-backed(d)
 
5,899
   
6,845
 
Extendible notes(e)
 
13,984
   
14,022
 
Subordinated notes(f)
 
2,964
   
2,984
 
Total
 
215,086
   
204,397
 
Total borrowings
$
366,679
 
$
362,069
 
             

(a)
 
Entirely obligations of consolidated, liquidating securitization entities. See note 14.
 
(b)
 
Included short-term borrowings by consolidated, liquidating securitization entities of $732 million and $697 million at March 31, 2006 and December 31, 2005, respectively. See note 14.
 
(c)
 
Included $250 million of subordinated notes guaranteed by GE at both March 31, 2006, and December 31, 2005.
 
(d)
 
Asset-backed senior notes were all issued by consolidated, liquidating securitization entities. See note 14.
 
(e)
 
Included $38 million of obligations of consolidated, liquidating securitization entities at December 31, 2005. See note 14.
 
(f)
 
Included $750 million of subordinated notes guaranteed by GE at both March 31, 2006, and December 31, 2005.
 

 
12. A summary of increases (decreases) in shareowners’ equity that did not result directly from transactions with shareowners, net of income taxes, follows.
 
 
Three months ended
March 31
 
(In millions)
2006
 
2005
 
             
Net earnings
$
4,305
 
$
3,965
 
Investment securities - net
 
(672
)
 
(820
)
Currency translation adjustments - net
 
(260
)
 
61
 
Cash flow hedges - net
 
273
   
629
 
Minimum pension liabilities - net
 
(15
)
 
13
 
Total
$
3,631
 
$
3,848
 

 


13. We adopted Statement of Financial Accounting Standards (SFAS) 123 (revised 2004), Share-Based Payment (SFAS 123R), on January 1, 2006, using the modified prospective method. Among other things, SFAS 123R requires expensing the fair value of stock options, a previously optional accounting method that we adopted voluntarily in 2002. The transitional effects of this provision of SFAS 123R consisted of a reduction in first quarter 2006 net earnings of $3 million to expense the unvested portion of options granted in 2001.
 
A comparison of reported net earnings for the three months ended March 31, 2006 and 2005, and pro-forma net earnings for the three months ended March 31, 2005, including effects of expensing stock options, follows.
 
 
Three months ended
March 31
 
(In millions; per-share amounts in dollars)
2006
 
2005
 
             
Net earnings, as reported
$
4,305
 
$
3,965
 
Earnings per share, as reported
           
Diluted
 
0.41
   
0.37
 
Basic
 
0.41
   
0.37
 
Stock option expense included in net earnings
 
25
   
37
 
Total stock option expense
 
25
   
64
(a)
             
Pro-forma effects
           
Net earnings, on pro-forma basis
       
3,938
 
Earnings per share, on pro-forma basis
           
Diluted
       
0.37
 
Basic
       
0.37
 
             

Other share-based compensation expense recognized in net earnings was $26 million and $30 million for the three months ended March 31, 2006 and 2005, respectively. The total income tax benefit recognized in earnings for all share-based compensation arrangements was $27 million and $31 million for the three months ended March 31, 2006 and 2005, respectively.
 
(a)
 
As if we applied SFAS 123R to expense stock options in all periods. Included amounts we actually recognized in earnings.
 

 
SFAS 123R also required us to change the statement of cash flow classification of certain tax benefits from share-based compensation deductions beginning on January 1, 2006. As a result, we classified $26 million as cash from financing activities rather than cash from operating activities in the first quarter 2006.
 


Other Stock-Related Information
 
We grant stock options, restricted stock units (RSUs) and performance share units (PSUs) to employees under the 1990 Long-Term Incentive Plan as described in our current Proxy Statement. In addition, we grant options and RSUs in limited circumstances to consultants, advisors and independent contractors (primarily non-employee talent at NBC Universal) under a plan approved by our Board of Directors in 1997 (the consultants’ plan). There are outstanding grants under two separate shareowner-approved option plans for non-employee directors. The last grant was in 2002 and no further grants are expected to be made under these plans. Share requirements may be met from either unissued or treasury shares. Stock options expire 10 years from the date they are granted and vest over service periods that range from one to five years. RSUs give the recipients the right to receive shares of our stock upon the lapse of their related restrictions. Restrictions on RSUs lapse in various increments and at various dates, beginning after three years from date of grant through grantee retirement. Although the plan permits us to issue RSUs settleable in cash, we have only issued RSUs settleable in shares of our stock. PSUs give recipients the right to receive shares of our stock upon the achievement of certain performance targets.
 
All grants of GE options under all plans must be approved by the Management Development and Compensation Committee, which consists entirely of outside directors.
 
Stock Option Activity
 
 
Shares
(in thousands)
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
(in millions)
                                     
Outstanding at January 1, 2006
 
259,116
     
$
33.07
                     
Granted
 
146
       
33.28
                     
Exercised
 
(4,490
)
     
16.56
                     
Forfeited
 
(927
)
     
31.83
                     
Expired
 
(1,465
)
     
41.30
                     
Outstanding at March 31, 2006
 
252,380
     
$
33.32
       
4.6
     
$
1,213
 
Exercisable at March 31, 2006
 
197,673
     
$
33.71
       
3.8
     
$
1,048
 
Options expected to vest
 
50,624
     
$
31.69
       
7.6
     
$
161
 

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 the three months ended March 31, 2006 and 2005, was $8.40 and $9.42, respectively. The following assumptions were used in arriving at the fair value of options granted during the three months ended March 31, 2006 and 2005: risk-free interest rates of 4.6% and 4.1%; dividend yields of 3.0% and 2.4%; expected volatility factors of 28% and 28%; and expected lives of 6 years and 6 years. Risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield is based on a set dividend rate. Expected volatility is based on implied volatility from traded options of our stock and historical volatility of our stock. The expected option life is based on our historical experience of employee exercise behavior.
 


The total intrinsic value of options exercised during the three months ended March 31, 2006 and 2005 was $79 million and $348 million, respectively. As of March 31, 2006, there was $156 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of 3 years and 5 months.
 
RSU Activity
 
 
Shares
(in thousands)
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
(in millions)
                             
Outstanding at January 1, 2006
   
33,078
                     
Granted
   
146
                     
Vested
   
(379
)
                   
Forfeited
   
(569
)
                   
Outstanding at March 31, 2006
   
32,276
       
6.1
     
$
1,123
 
RSUs expected to vest
   
28,907
       
5.6
     
$
1,005
 

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 the three months ended March 31, 2006 and 2005, was $33.26 and $36.20, respectively. The total intrinsic value of RSUs vested during the three months ended March 31, 2006 and 2005, was $13 million and $12 million, respectively. As of March 31, 2006, there was $465 million of total unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of 5 years and 7 months.
 
PSU Activity
 
As of March 31, 2006, 1.1 million PSUs with a weighted-average remaining contractual term of 2 years and 4 months, an aggregate intrinsic value of $39 million and $20 million of unrecognized compensation cost were outstanding.
 


14. We securitize financial assets in the ordinary course of business to improve shareowner returns. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improving returns, these securitization transactions serve as funding sources for a variety of diversified lending and securities transactions. Historically, we have used both GE-supported and third-party entities to execute securitization transactions funded in the commercial paper and term bond markets.
 
Securitized assets that are on-balance sheet include assets consolidated upon adoption of Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, as amended. Although we do not control these entities, consolidation was required because we provided a majority of the credit and liquidity support for their activities. A majority of these entities were established to issue asset-backed securities, using assets that were sold by us and by third parties. These entities differ from others included in our consolidated financial statements because the assets they hold are legally isolated and are unavailable to us under any circumstances. Repayment of their liabilities depends primarily on cash flows generated by their assets. Because we have ceased transferring assets to these entities, balances will decrease as the assets repay. We refer to these entities as “consolidated, liquidating securitization entities.”
 
The following table represents assets in securitization entities, both consolidated and off-balance sheet.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Receivables secured by:
           
Equipment
$
11,309
 
$
12,949
 
Commercial real estate
 
12,355
   
13,010
 
Residential real estate
 
8,083
   
8,882
 
Other assets
 
13,079
   
12,869
 
Credit card receivables
 
10,973
   
10,039
 
GE trade receivables
 
4,037
   
3,960
 
Total securitized assets
$
59,836
 
$
61,709
 

 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Off-balance sheet(a)(b)
$
43,983
 
$
43,805
 
On-balance sheet(c)
 
15,853
   
17,904
 
Total securitized assets
$
59,836
 
$
61,709
 
             

(a)
 
At March 31, 2006 and December 31, 2005, liquidity support amounted to $2,159 million and $1,931 million, respectively. These amounts are net of $3,424 million and $3,786 million, respectively, participated or deferred beyond one year. Credit support amounted to $5,648 million and $5,988 million at March 31, 2006 and December 31, 2005, respectively.
 
(b)
 
Liabilities for recourse obligations related to off-balance sheet assets were $63 million and $93 million at March 31, 2006 and December 31, 2005, respectively.
 
(c)
 
At March 31, 2006 and December 31, 2005, liquidity support amounted to $8,768 million and $10,044 million, respectively. These amounts are net of $34 million and $138 million, respectively, participated or deferred beyond one year. Credit support amounted to $3,893 million and $4,780 million at March 31, 2006 and December 31, 2005, respectively.
 

 


The portfolio of financing receivables consisted of loans and financing lease receivables secured by equipment, commercial and residential real estate and other assets; credit card receivables; and trade receivables. Examples of these assets include loans and leases on manufacturing and transportation equipment, loans on commercial property, commercial loans, and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base.
 
Assets in consolidated, liquidating securitization entities are shown in the following captions in the Condensed Statement of Financial Position.
 
 
At
 
(In millions)
3/31/06
 
12/31/05
 
             
Financing receivables - net (note 8)
$
14,864
 
$
16,615
 
All other assets
 
989
   
1,289
 
Total
$
15,853
 
$
17,904
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
A. Results of Operations
 
General Electric Company’s consolidated financial statements represent the combination of the industrial manufacturing and product services businesses of General Electric Company (GE) and the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).
 
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 Exhibit 99 to this report on Form 10-Q.
 
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.
 
Overview
 
General Electric Company earnings from continuing operations increased 14% to $4.042 billion in the first quarter of 2006 compared with $3.560 billion in 2005. Earnings per share (EPS) from continuing operations were $0.39 in the first quarter of 2006, up 18% from last year’s $0.33. Five of our six segments contributed double-digit earnings growth for the quarter.
 
Earnings from discontinued operations were $0.3 billion and included the results of Genworth Financial, Inc. (Genworth), GE Life and most of GE Insurance Solutions Corporation (GE Insurance Solutions).
 
Net earnings increased 9% to $4.305 billion and EPS increased 11% to $0.41 in the first quarter of 2006.
 


Revenues of $37.8 billion in the first quarter of 2006 were 10% higher than in the corresponding period of 2005, reflecting strong organic growth of 9%. A reconciliation between reported and organic revenues is shown in Exhibit 99. Industrial sales increased 11% to $23.1 billion, reflecting core growth, and the effects of the 2006 Olympics broadcasts and acquisitions. Sales of product services (including sales of spare parts and related services) grew 10% to $6.7 billion in the first quarter of 2006. Financial services revenues grew 8% over the comparable period of last year to $14.7 billion, reflecting core growth.
 
Overall, acquisitions contributed $1.0 billion and $3.8 billion to consolidated revenues in the first quarters of 2006 and 2005, respectively. Our consolidated net earnings in the first quarters of 2006 and 2005 included approximately $0.1 billion and $0.3 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 $0.3 billion and $0.4 billion in the first quarters of 2006 and 2005, respectively. The effect on earnings was inconsequential in each of the first quarters of 2006 and 2005.
 
Segment Operations
 
Operating segments comprise our six businesses focused on the broad markets they serve: Infrastructure, Industrial, Healthcare, NBC Universal, Commercial Finance and Consumer Finance. For segment reporting purposes, certain GECS businesses are included in the industrial operating segments that actively manage such businesses and report their results for internal performance measurement purposes. These include Aviation Financial Services, Energy Financial Services and Transportation Finance reported in the Infrastructure segment, and Equipment Services reported in the Industrial segment.
 
Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business in a given period. In connection with that assessment, the Chief Executive Officer may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team.
 
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured - excluded in determining segment profit, which we refer to as “operating profit,” for Healthcare, NBC Universal and the industrial businesses of the Industrial and Infrastructure segments; included in determining segment profit, which we refer to as “net earnings,” for Commercial Finance, Consumer Finance, and the financial services businesses of the Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance) and the Industrial segment (Equipment Services).
 
We have reclassified certain prior-period amounts to conform to the current period’s presentation. In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments.
 


Infrastructure
 
 
Three months ended
March 31
       
(In millions)
2006
 
2005
       
                   
Revenues
$
10,152
 
$
9,374
       
                   
Segment profit
$
1,703
 
$
1,540
       
                   
Revenues
                 
Aviation
$
3,041
 
$
2,590
       
Aviation Financial Services
 
934
   
817
       
Energy
 
3,835
   
3,951
       
Energy Financial Services
 
301
   
228
       
Oil & Gas
 
772
   
641
       
Transportation
 
1,023
   
756
       
                   
Segment profit
                 
Aviation
$
645
 
$
527
       
Aviation Financial Services
 
206
   
163
       
Energy
 
436
   
577
       
Energy Financial Services
 
117
   
94
       
Oil & Gas
 
55
   
27
       
Transportation
 
204
   
82
       

 
Infrastructure revenues increased 8%, or $0.8 billion, in the first quarter of 2006 as higher volume ($0.8 billion) was partially offset by the strengthening U.S. dollar ($0.1 billion) and lower prices ($0.1 billion) at the industrial businesses of the segment. The increase in volume reflects increased sales of commercial and military services and commercial engines at Aviation and increased locomotive sales at Transportation, partially offset by lower sales at Energy. Energy sold 21 large heavy-duty gas turbines in the first quarter of 2006, compared with 34 in the corresponding period of 2005. Revenues also increased as a result of organic revenue growth at Aviation Financial Services ($0.1 billion) and Energy Financial Services ($0.1 billion).
 
Segment profit rose 11%, or $0.2 billion, as productivity ($0.2 billion) and higher volume ($0.1 billion) were partially offset by higher material and other costs ($0.1 billion) and lower prices ($0.1 billion) at the industrial businesses of the segment. We realized productivity improvements at Transportation and Aviation. Volume increases were primarily at Aviation. Segment profit from the financial services businesses increased $0.1 billion as a result of core growth at Aviation Financial Services and Energy Financial Services, despite the absence of a 2006 counterpart to the 2005 one-time benefits from our aircraft leasing reorganization.
 


Industrial
 
 
Three months ended
March 31
       
(In millions)
2006
 
2005
       
                   
Revenues
$
8,140
 
$
7,668
       
                   
Segment profit
$
600
 
$
526
       
                   
Revenues
                 
Consumer & Industrial
$
3,534
 
$
3,261
       
Equipment Services
 
1,634
   
1,574
       
Plastics
 
1,644
   
1,648
       
                   
Segment profit
                 
Consumer & Industrial
$
220
 
$
165
       
Equipment Services
 
16
   
10
       
Plastics
 
225
   
240
       

 
Industrial revenues rose 6%, or $0.5 billion, in the first quarter of 2006 as higher volume ($0.5 billion) was partially offset by the strengthening U.S. dollar ($0.1 billion) at the industrial businesses in the segment. The increase in volume was primarily at Consumer & Industrial and at Security which acquired Edwards Systems Technology late in the first quarter of 2005. Revenues at Equipment Services also increased as a result of organic revenue growth ($0.1 billion).
 
Segment profit rose 14%, or $0.1 billion, in the first quarter of 2006 as productivity ($0.2 billion), primarily at Consumer & Industrial and Plastics, was partially offset by higher material and other costs ($0.1 billion), primarily at Consumer & Industrial. Segment profit was unaffected by price as higher prices at Consumer & Industrial offset lower prices at Plastics.
 
Healthcare revenues rose $0.3 billion, or 10%, in the first quarter of 2006 compared with the first quarter of 2005 as higher volume ($0.5 billion) more than offset the strengthening U.S. dollar ($0.1 billion) and the effect of lower prices ($0.1 billion). The increase in volume relates to the 2006 acquisition of IDX, growth in services at Healthcare IT, and stronger ultrasound, CT and X-ray equipment sales. Operating profit of $0.5 billion in 2006 was 21% higher than in the first quarter of 2005 as the effects of productivity ($0.1 billion) and higher volume ($0.1 billion) more than offset the effect of lower prices ($0.1 billion).
 
NBC Universal reported revenues of $4.5 billion in the first quarter of 2006 compared with $3.6 billion in the first quarter of 2005. The $0.9 billion, or 24%, increase in revenues primarily resulted from the absence of a prior-year counterpart to the 2006 Olympic Games broadcasts ($0.7 billion), the effects of exiting a film distribution agreement ($0.2 billion) and improvements in the film ($0.1 billion) and cable ($0.1 billion) businesses, partially offset by the effects of lower ratings on network and station ad sales ($0.2 billion). Segment profit declined 8%, or $0.1 billion, in the first quarter of 2006, as the favorable effects of the film distribution exit ($0.1 billion) were more than offset by the effects of lower earnings from network and station operations ($0.2 billion), including the 2006 Olympics broadcasts ($0.1 billion).
 


Commercial Finance
 
 
Three months ended
March 31
       
(In millions)
2006
 
2005
       
                   
Revenues
$
5,484
 
$
5,072
       
                   
Segment profit
$
1,174
 
$
926
       
                   
                   
 
At
 
(In millions)
3/31/06
 
3/31/05
 
12/31/05
 
                   
Total assets
$
195,209
 
$
187,626
 
$
190,546
 
                   
                   
 
Three months ended
March 31
       
(In millions)
2006
 
2005
       
                   
Revenues
                 
Capital Solutions
$
2,820
 
$
2,889
       
Real Estate
 
1,075
   
898
       
                   
Segment profit
                 
Capital Solutions
$
339
 
$
286
       
Real Estate
 
441
   
310
       
                   
                   
 
At
 
(In millions)
3/31/06