EX-99.A 8 exhibit99a.htm EXHIBIT 99(A) exhibit99a.htm
Exhibit 99(a)
 
General Electric Company
Financial Measures That Supplement Generally Accepted Accounting Principles
 

 
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 rules. Specifically, we have referred to:
 
·  
Operating earnings and operating earnings per share (EPS)
 
·  
Operating and non-operating pension costs (income)
 
·  
GE Capital ending net investment (ENI), excluding cash and equivalents
 
·  
Industrial segment organic revenue growth
 
The reasons we use these non-GAAP financial measures and their reconciliation to their most directly comparable GAAP financial measures follow.
 

Operating Earnings and Operating EPS
    
 
Three months ended March 31
    
(In millions; except earnings per share)
2014 
  
2013 
  
V%
               
Earnings from continuing operations attributable to GE
$
 2,987 
  
$
 3,647 
  
 (18)%
Adjustment (net of tax): non-operating pension costs/(income)
  
 342 
    
 423 
    
Operating earnings
$
 3,329 
  
$
 4,070 
  
 (18)%
               
Earnings per share – diluted(a)
              
Continuing earnings per share
$
 0.29 
  
$
 0.35 
  
 (17)%
Adjustment (net of tax): non-operating pension costs/(income)
  
 0.03 
    
 0.04 
    
Operating earnings per share
$
 0.33 
  
$
 0.39 
  
 (15)%
               
(a)  
Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.

Operating earnings 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 and prior service cost 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 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 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.
 
 
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Operating and Non-Operating Pension Costs (Income)
             
Three months ended March 31
(In millions)
            
2014 
  
2013 
                       
Service cost for benefits earned
            
$
 318 
  
$
 401 
Prior service cost amortization
              
 54 
    
 61 
Operating pension costs
              
 372 
    
 462 
Expected return on plan assets
              
 (801)
    
 (875)
Interest cost on benefit obligations
              
 686 
    
 614 
Net actuarial loss amortization
              
 641 
    
 912 
Non-operating pension costs (income)
              
 526 
    
 651 
Total principal pension plans costs
            
$
 898 
  
$
 1,113 
                       

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 and prior service cost amortization for our principal pension plans. Non-operating pension costs (income) 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.
 
GE Capital Ending Net Investment (ENI), Excluding Cash and Equivalents
 
(In billions)
  
March 31, 2014
     
GECC total assets
$
510.4 
   Less assets of discontinued operations
  
1.4 
   Less non-interest bearing liabilities
  
60.0 
GE Capital ENI
  
449.0 
   Less cash and equivalents
  
75.3 
GE Capital ENI, excluding cash and equivalents
$
373.7 
     

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 cash and equivalents, we provide a meaningful measure of assets requiring capital to fund our GE Capital segment as a substantial amount of this cash resulted from debt issuances to pre-fund future debt maturities and will not be used to fund additional assets. 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.
 
 
(2)
 
 
 
Industrial Segment Organic Revenue Growth
 
Three months ended March 31
      
(Dollars in millions)
  
2014 
    
2013 
    
V%
                 
Segment revenues:
                
    Power & Water
$
5,509 
  
$
4,825 
      
    Oil & Gas
  
4,308 
    
3,399 
      
    Energy Management
  
1,672 
    
1,748 
      
    Aviation
  
5,778 
    
5,074 
      
    Healthcare
  
4,198 
    
4,289 
      
    Transportation
  
1,227 
    
1,422 
      
    Appliances & Lighting
  
1,857 
    
1,917 
      
Industrial segment revenues
  
24,549 
    
22,674 
    
8%
Less the effects of:
                
     Acquisitions, business dispositions (other than dispositions of businesses acquired
                
       for investment) and currency exchange rates
  
438 
    
317 
      
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)
$
24,111 
  
$
22,357 
    
8%
                 

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.

 
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