GE 2011 Annual Report Download - page 139

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GE 2011 ANNUAL REPORT 137
 
Financial Measures that Supplement Generally
Accepted Accounting Principles
We sometimes use information derived from consolidated fi nan-
cial information but not presented in our fi nancial statements
prepared in accordance with U.S. generally accepted accounting
principles (GAAP). Certain of these data are considered “non-
GAAP fi nancial measures” under U.S. Securities and Exchange
Commission rules. Specifi cally, we have referred, in various sec-
tions of this Annual Report, to:
• Industrial cash fl ow from operating activities (Industrial CFOA)
• Operating earnings, Operating EPS and Operating EPS exclud-
ing the effects of the preferred stock redemption
• Operating and non-operating pension costs (income)
• Average GE shareowners’ equity, excluding effects of
discontinued operations
• Ratio of debt to equity at GECS, net of cash and equivalents
and with classifi cation of hybrid debt as equity
• GE Capital ending net investment (ENI), excluding cash
and equivalents
• GE pre-tax earnings from continuing operations, excluding
GECS earnings from continuing operations, the correspond-
ing effective tax rates and the reconciliation of the U.S. federal
statutory rate to those effective tax rates
The reasons we use these non-GAAP fi nancial measures and the
reconciliations to their most directly comparable GAAP fi nancial
measures follow.
Industrial Cash Flow from Operating Activities
(Industrial CFOA)
(In millions) 2011 2010 2009 2008 2007
Cash from GE’s
operating activities,
as reported $12,057 $14,746 $16,405 $19,138 $23,301
Less dividends
from GECS —— — 2,351 7,291
Cash from GE’s
operating activities,
excluding dividends
from GECS
(Industrial CFOA) $12,057 $14,746 $16,405 $16,787 $16,010
We refer to cash generated by our industrial businesses as
“Industrial CFOA,” which we defi ne as GE’s cash from operating
activities less the amount of dividends received by GE from
GECS. This includes the effects of intercompany transactions,
including GE customer receivables sold to GECS; GECS services for
trade receivables management and material procurement; build-
ings and equipment (including automobiles) leased between GE and
GECS; information technology (IT) and other services sold to GECS by
GE; aircraft engines manufactured by GE that are installed on air-
craft purchased by GECS from third-party producers for lease to
others; and various investments, loans and allocations of GE corpo-
rate overhead costs. We believe that investors may fi nd it useful to
compare GE’s operating cash fl ows without the effect of GECS
dividends, since these dividends are not representative of the oper-
ating cash fl ows of our industrial businesses and can vary from
period to period based upon the results of the fi nancial services
businesses. Management recognizes that this measure may not be
comparable to cash fl ow results of companies which contain both
industrial and fi nancial services businesses, but believes that this
comparison is aided by the provision of additional information about
the amounts of dividends paid by our fi nancial services business
and the separate presentation in our fi nancial statements of the
Financial Services (GECS) cash fl ows. 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 fl ow with the operating cash fl ow of other
non-fi nancial businesses and companies and as such provides a
useful measure to supplement the reported GAAP CFOA measure.
Operating Earnings, Operating EPS and Operating EPS
Excluding the Effects of the Preferred Stock Redemption
(In millions; except earnings per share) 2011 2010 V%
Earnings from continuing
operations attributable to GE $14,074 $12,517 12%
Less: Non-operating pension costs
(income), net of tax 688 (204)
Operating earnings $14,762 $12,313 20%
Earnings per share—diluted (a)
Continuing earnings per share $ 1.23 $ 1.14 8%
Less: Non-operating pension costs
(income), net of tax 0.06 (0.02)
Operating earnings per share 1.29 1.12 15%
Less: Effects of the preferred stock
redemption 0.08 —
Operating EPS excluding the
effects of the preferred stock
redemption $ 1.37 $ 1.12 22%
(a) Earnings-per-share amounts are computed independently. As a result, the sum
of per-share amounts may not equal the total.