EX-99 6 ge10q1q15ex99a.htm
Exhibit 99(a)

FINANCIAL MEASURES THAT SUPPLEMENT U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES MEASURES (NON-GAAP FINANCIAL MEASURES)

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 U.S. Securities and Exchange Commission rules. Specifically, we have referred to:

·
Operating earnings (loss) and operating earnings (loss) per share (EPS) – Excluding the GE Capital exit impacts
·
Operating and non-operating pension costs
·
Consolidated and GECC Revenues – Excluding the GE Capital exit impacts
·
Oil & Gas organic revenue and operating profit growth
·
Industrial segment organic revenue growth
·
GE Capital ending net investment (ENI), excluding liquidity
·
GECC Tier 1 Common Ratio Estimate

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.



OPERATING EARNINGS (LOSS) AND EPS - EXCLUDING THE GE CAPITAL EXIT IMPACTS
    
         
     
Three months ended March 31
(Dollars in millions; except per share amounts)
            
2015
  
2014
  
V%
                               
Earnings (loss) from continuing operations attributable to GE
      
$
(11,371)
  
$
2,747
  
U
Adjustment (net of tax): non-operating pension costs
                  
452
    
342
    
Operating earnings (loss)
                  
(10,919)
    
3,089
    
Adjustment (net of tax) - GE Capital exit impacts:
                              
   GE Capital Day 1 charge
                  
13,764
    
-
    
   Real Estate in discontinued operations
                  
72
    
240
    
   Forgone tax benefit primarily associated with ANZ Consumer Lending disposition
        
231
    
-
    
 Operating earnings excluding the GE Capital exit impacts
                  
3,148
    
3,329
  
(5)%
                               
Earnings (loss) per share – diluted(a)
                              
Continuing earnings (loss) per share
                
$
(1.13)
  
$
0.27
  
U
Adjustment (net of tax): non-operating pension costs
                  
0.04
    
0.03
    
Operating earnings (loss) per share
                  
(1.08)
    
0.30
  
U
Adjustment (net of tax): GE Capital exit impacts
                  
1.39
    
0.02
    
Operating earnings per share,
                              
   excluding the GE Capital exit impacts
                
$
0.31
  
$
0.33
  
(6)%
                               
(a)
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.

Operating earnings (loss) excludes non-service related pension costs of our principal pension plans comprising interest cost, expected return on plan assets and amortization of actuarial gains/losses. The service cost, prior service cost and curtailment loss components of our principal pension plans are included in operating earnings. We believe that these components of pension cost better reflect the ongoing service-related costs of providing pension benefits to our employees. As such, we believe that our measure of operating earnings (loss) provides management and investors with a useful measure of the operational results of our business. Other components of GAAP pension cost are mainly driven by capital allocation decisions and market performance, and we manage these separately from the operational performance of our businesses. Neither GAAP nor operating pension costs are necessarily indicative of the current or future cash flow requirements related to our pension plan. We also believe that this measure, considered along with the corresponding GAAP measure, provides management and investors with additional information for comparison of our operating results to the operating results of other companies.

We also believe that operating earnings and EPS excluding the effects of the GE Capital exit impacts, which include charges recorded in the first quarter of 2015, the classification of certain businesses as discontinued operations and forgone tax benefits, are meaningful measures because they increase the comparability of period-to-period results.
OPERATING AND NON-OPERATING PENSION COSTS
           
 
Three months ended March 31
(In millions)
2015
  
2014
           
Service cost for benefits earned
$
361
  
$
318
Prior service cost amortization
  
52
    
54
Curtailment loss
  
71
    
-
Operating pension costs
  
484
    
372
           
Expected return on plan assets
  
(825)
    
(801)
Interest cost on benefit obligations
  
695
    
686
Net actuarial loss amortization
  
825
    
641
Non-operating pension costs
  
695
    
526
Total principal pension plans costs
$
1,179
  
$
898
           

We have provided the operating and non-operating components of cost for our principal pension plans.  Operating pension costs comprise the service cost of benefits earned, prior service cost amortization and curtailment loss for our principal pension plans. Non-operating pension costs comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial loss amortization for our principal pension plans. We believe that the operating components of pension costs better reflects the ongoing service-related costs of providing pension benefits to our employees. We believe that the operating and non-operating components of cost for our principal pension plans, considered along with the corresponding GAAP measure, provide management and investors with additional information for comparison of our pension plan costs and operating results with the pension plan costs and operating results of other companies.



CONSOLIDATED AND GECC REVENUES - EXCLUDING THE GE CAPITAL EXIT IMPACTS
               
 
Three Months Ended March 31
(Dollars in millions)
  
2015
    
2014
  
V%
               
Consolidated revenues from continuing operations
  
29,356
    
33,548
  
(12)%
Adjustment: GE Capital Day 1 charge
  
3,249
    
-
    
Adjustment: Real Estate in discontinued operations
  
499
    
630
    
Consolidated revenues excluding the GE Capital exit impacts
$
33,104
  
$
34,178
  
(3)%
               
GECC revenues from continuing operations
  
5,982
    
9,885
  
(39)%
Adjustment: GE Capital Day 1 charge
  
3,249
    
-
    
Adjustment: Real Estate in discontinued operations
  
499
    
630
    
Revenues excluding the GE Capital exit impacts
$
9,730
  
$
10,515
  
(7)%
               

We have presented our consolidated revenues and GECC revenues excluding the GE Capital exit impacts, which include certain charges recorded in the first quarter of 2015 and the classification of certain businesses as discontinued operations. We believe that revenues adjusted for these GE Capital exit impacts are meaningful measures because they increase the comparability of period-to-period results.
INDUSTRIAL SEGMENT ORGANIC REVENUE GROWTH
                 
 
Three months ended March 31
(Dollars in millions)
  
2015
    
2014
    
V%
                 
Segment revenues:
                
    Power & Water
$
5,716
  
$
5,509
      
    Oil & Gas
  
3,961
    
4,308
      
    Energy Management
  
1,685
    
1,672
      
    Aviation
  
5,674
    
5,778
      
    Healthcare
  
4,075
    
4,198
      
    Transportation
  
1,308
    
1,227
      
    Appliances & Lighting
  
1,941
    
1,857
      
Industrial segment revenues
  
24,360
    
24,549
    
 (1)%
Less the effects of:
                
     Acquisitions, business dispositions (other than dispositions of businesses acquired
                
         for investment) and currency exchange rates
  
(769)
    
202
      
Industrial segment revenues excluding effects of acquisitions, business dispositions
                
    (other than dispositions of businesses acquired for investment) and currency exchange
                
         rates (Industrial segment organic revenues)
$
25,129
  
$
24,347
    
 3 %
                 

Organic revenue growth measures revenue excluding the effects of acquisitions, business dispositions and currency exchange rates. We believe that this measure provides management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and currency exchange, which activities are subject to volatility and can obscure underlying trends. We also believe that presenting organic revenue growth separately for our industrial businesses provides management and investors with useful information about the trends of our industrial businesses and enables a more direct comparison to other non-financial businesses and companies. Management recognizes that the term "organic revenue growth" may be interpreted differently by other companies and under different circumstances. Although this may have an effect on comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the respective businesses or companies and may therefore be a useful tool in assessing period-to-period performance trends.



OIL & GAS ORGANIC REVENUE GROWTH
                 
 
Three Months Ended March 31
(Dollars in millions)
  
2015
    
2014
  
V%
  
                 
Oil & Gas segment revenue
$
3,961
  
$
4,308
  
(8)%
  
Less the effects of:
                
     Acquisitions, business dispositions (other than
                
     dispositions of businesses acquired for investment)
                
     and currency exchange rates
  
(239)
    
121
      
Oil & Gas revenues excluding effects of acquisitions,
                
     business dispositions (other than dispositions of
                
     businesses acquired for investment) and currency
                
     exchange rates (Oil & Gas organic revenue)
$
4,200
  
$
4,187
  
-%
  
                 

OIL & GAS ORGANIC OPERATING PROFIT GROWTH
                 
 
Three Months Ended March 31
(Dollars in millions)
  
2015
    
2014
  
V%
  
                 
Oil & Gas segment profit
$
432
  
$
446
  
(3)%
  
Less the effects of:
                
     Acquisitions, business dispositions (other than
                
     dispositions of businesses acquired for investment)
                
     and currency exchange rates
  
(64)
    
-
      
Oil & Gas segment profit excluding effects of acquisitions,
                
     business dispositions (other than dispositions of
                
     businesses acquired for investment) and currency
                
     exchange rates (Oil & Gas organic operating profit)
$
496
  
$
446
  
11%
  
                 

Organic revenue and operating profit growth measure revenue and profit excluding the effects of acquisitions, business dispositions and currency exchange rates. We believe that these measures provide management and investors with a more complete understanding of underlying operating results and trends of established, ongoing operations by excluding the effect of acquisitions, dispositions and currency exchange, which activities are subject to volatility and can obscure underlying trends. Management recognizes that the terms "organic revenue growth" and "organic operating profit growth" may be interpreted differently by other companies and under different circumstances. Although this may have an effect on comparability of absolute percentage growth from company to company, we believe that these measures are useful in assessing trends of the Oil & Gas business and may therefore be a useful tool in assessing period-to-period performance trends.



INDUSTRIAL CASH FLOWS FROM OPERATING ACTIVITIES (INDUSTRIAL CFOA)
               
 
Three months ended March 31
(Dollars in millions)
  
2015
    
2014
  
V%
               
Cash from GE's operating activities (continuing operations), as reported
$
1,340
  
$
1,750
  
(23)%
Less dividends from GECC
  
450
    
500
    
Cash from GE's operating activities (continuing operations),
              
   excluding dividends from GECC (Industrial CFOA)
$
890
  
$
1,250
  
(29)%
               

We define "Industrial CFOA" as GE's cash from operating activities (continuing operations) less the amount of dividends received by GE from GECC. This includes the effects of intercompany transactions, including GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased by GE from GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs. We believe that investors may find it useful to compare GE's operating cash flows without the effect of GECC dividends, since these dividends are not representative of the operating cash flows of our industrial businesses and can vary from period to period based upon the results of the financial services businesses. Management recognizes that this measure may not be comparable to cash flow results of companies which contain both industrial and financial services businesses, but believes that this comparison is aided by the provision of additional information about the amounts of dividends paid by our financial services business and the separate presentation in our financial statements of the GECC cash flows. We believe that our measure of Industrial CFOA provides management and investors with a useful measure to compare the capacity of our industrial operations to generate operating cash flow with the operating cash flow of other non-financial businesses and companies and as such provides a useful measure to supplement the reported GAAP CFOA measure.

GE CAPITAL ENDING NET INVESTMENT (ENI), EXCLUDING LIQUIDITY
  
       
(In billions)
March 31, 2015
December 31, 2014(b)
           
Financial Services (GECC) total assets
$
476.5
  
$
500.2
   Less assets of discontinued operations
  
31.3
    
1.2
   Less non-interest bearing liabilities
  
66.0
    
60.5
GE Capital ENI
  
379.2
    
438.5
   Less liquidity(a)
  
76.4
    
75.5
GE Capital ENI, excluding liquidity
$
302.8
  
$
363.0
           
(a)
Liquidity includes debt obligations of the U.S. Treasury of $2.8 billion and $1.2 billion at March 31, 2015 and December 31, 2014, respectively.
(b)
As originally reported.

We use ENI to measure the size of our GE Capital segment. We believe that this measure is a useful indicator of the capital (debt or equity) required to fund a business as it adjusts for non-interest bearing current liabilities generated in the normal course of business that do not require a capital outlay. We also believe that by excluding liquidity, we provide a meaningful measure of assets requiring capital to fund our GE Capital segment as a substantial amount of liquidity resulted from debt issuances to pre-fund future debt maturities and will not be used to fund additional assets. Liquidity consists of cash and equivalents and certain debt obligations of the U.S. Treasury. As a general matter, investments included in liquidity are expected to be highly liquid, giving us the ability to readily convert them to cash. Providing this measure will help investors measure how we are performing against our previously communicated goal to reduce the size of our financial services segment.


GECC TIER 1 COMMON RATIO ESTIMATE(a)
       
 
Three months ended March 31
(In billions)
2015
  
2014
           
Shareowners' equity(b)
$
70.7
  
$
84.6
Adjustments:
          
   Preferred equity
  
(4.9)
    
(4.9)
   Goodwill and other intangible assets
  
(22.0)
    
(26.9)
   Other additions (deductions)
  
1.2
    
0.2
GECC Tier 1 common
  
45.0
    
53.0
Estimated risk-weighted assets(c)
  
422.8
    
464.3
GECC Tier 1 common ratio estimate
  
10.6%
    
11.4%
           
(a)
Includes discontinued operations.
(b)
Total equity excluding noncontrolling interests.
(c)
Based on Basel 3 risk-weighted assets estimates.

The GECC Tier 1 common ratio estimate is the ratio of Tier 1 common equity to total risk-weighted assets as calculated based on our interpretation of the standardized U.S. Basel 3 capital rules on a transitional basis. We are not required by regulators to disclose this capital ratio, and therefore this capital ratio is considered a non-GAAP financial measure. We believe that this capital ratio is a useful measure to investors because it is widely used by analysts and regulators to assess the capital position of financial services companies.