GE 2011 Annual Report Download - page 141

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GE 2011 ANNUAL REPORT 139
 
however, as the total amount of cash and equivalents at any point
in time may be different than the amount that could practically be
applied to reduce outstanding debt, and it may not be advanta-
geous or practical to replace certain long-term debt with equity.
In the fi rst quarter of 2009, GE made a $9.5 billion payment to
GECS (of which $8.8 billion was further contributed to GECC
through capital contribution and share issuance). Despite these
potential limitations, we believe that this measure, considered
along with the corresponding GAAP measure, provides investors
with additional information that may be more comparable to
other fi nancial institutions and businesses.
GE Capital Ending Net Investment (ENI), Excluding Cash and
Equivalents
December 31,
(In billions) 2011
January 1,
2010 (a)
GECC total assets $553.7 $653.6
Less assets of discontinued operations 1.1 15.1
Less non-interest bearing liabilities 32.3 50.3
GE Capital ENI 520.3 588.2
Less cash and equivalents 75.7 61.9
GE Capital ENI, excluding cash and equivalents $444.6 $526.3
(a) 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 cash and equivalents, we provide a meaningful
measure of assets requiring capital to fund our GE Capital seg-
ment, as a substantial amount of this cash and equivalents
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 fi nancial services segment.
GE Pre-Tax Earnings from Continuing Operations, Excluding
GECS Earnings from Continuing Operations and the
Corresponding Effective Tax Rates
(Dollars in millions) 2011 2010 2009
GE earnings from continuing
operations before income taxes $19,078 $15,060 $13,730
Less GECS earnings from
continuing operations 6,432 3,023 1,177
Total $12,646 $12,037 $12,553
GE provision for income taxes $ 4,839 $ 2,024 $ 2,739
GE effective tax rate, excluding
GECS earnings 38.3% 16.8% 21.8%
Reconciliation of U.S. Federal Statutory Income Tax Rate to
GE Effective Tax Rate, Excluding GECS Earnings
2011 2010 2009
U.S. federal statutory
income tax rate 35.0% 35.0% 35.0%
Reduction in rate resulting from
Tax on global activities
including exports (7.9) (13.5) (12.0)
U.S. business credits (2.3) (2.8) (1.1)
NBCU gain 14.9 ——
All other—net (1.4) (1.9) (0.1)
3.3 (18.2) (13.2)
GE effective tax rate, excluding
GECS earnings 38.3% 16.8% 21.8%
We believe that the GE effective tax rate is best analyzed in relation
to GE earnings before income taxes excluding the GECS net earn-
ings from continuing operations, as GE tax expense does not include
taxes on GECS earnings. Management believes that in addition to
the Consolidated and GECS tax rates shown in Note 14, this supple-
mental measure provides investors with useful information as it
presents the GE effective tax rate that can be used in comparing the
GE results to other non-fi nancial services businesses.
Five-year Financial Performance Graph: 2007–2011
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN AMONG GE,
S&P 500 AND DOW JONES INDUSTRIAL AVERAGE
The annual changes for the fi ve-year period shown in the graph on
this page are based on the assumption that $100 had been
invested in GE stock, the Standard & Poor’s 500 Stock Index (S&P
500) and the Dow Jones Industrial Average (DJIA) on December 31,
2006, and that all quarterly dividends were reinvested. The total
cumulative dollar returns shown on the graph represent the value
that such investments would have had on December 31, 2011.
FIVE-YEAR FINANCIAL
PERFORMANCE
(In dollars)
GE
S&P 500
DJIA
57
46
47
103
100
58
2006 2007 2008 2009 2010 2011
GE $100 $103 $47 $46 $ 57 $ 58
S&P 5 00 100 105 66 84 97 99
DJIA 100 109 74 91 104 112
2006 2007 2008 2009 2010 2011