GE 2011 Annual Report Download - page 36

34 GE 2011 ANNUAL REPORT
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Operations
The consolidated fi nancial statements of General Electric
Company (the Company) combine the industrial manufacturing
and services businesses of General Electric Company (GE) with
the fi nancial services businesses of General Electric Capital
Services, Inc. (GECS or fi nancial services). Unless otherwise indi-
cated by the context, we use the terms “GE,” “GECS” and “GECC”
on the basis of consolidation described in Note 1 to the consoli-
dated fi nancial statements.
In the accompanying analysis of fi nancial information, 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 account-
ing principles (GAAP). Certain of these data are considered
“non-GAAP fi nancial measures” under the U.S. Securities and
Exchange Commission (SEC) rules. For such measures, we have
provided supplemental explanations and reconciliations in the
Supplemental Information section.
We present Management’s Discussion of Operations in fi ve
parts: Overview of Our Earnings from 2009 through 2011, Global
Risk Management, Segment Operations, Geographic Operations
and Environmental Matters. Unless otherwise indicated, we
refer to captions such as revenues and earnings from continu-
ing operations attributable to the company simply as “revenues”
and “earnings” throughout this Management’s Discussion and
Analysis. Similarly, discussion of other matters in our consolidated
fi nancial statements relates to continuing operations unless
otherwise indicated.
Effective January 1, 2011, we reorganized the former
Technology Infrastructure segment into three segments—
Aviation, Healthcare and Transportation. The prior-period results
of the Aviation, Healthcare and Transportation businesses are
unaffected by this reorganization. Results for 2011 and prior
periods are reported on the basis under which we managed our
businesses in 2011.
On February 22, 2012, we merged our wholly-owned sub-
sidiary, GECS, with and into GECS’ wholly-owned subsidiary,
GECC. The merger simplifi ed our fi nancial services’ corporate
structure by consolidating fi nancial services entities and assets
within our organization and simplifying Securities and Exchange
Commission and regulatory reporting. Upon the merger, GECC
became the surviving corporation and assumed all of GECS’ rights
and obligations and became wholly-owned directly by General
Electric Company. Our fi nancial services segment, GE Capital, will
continue to comprise the continuing operations of GECC, which
now includes the run-off insurance operations previously held
and managed in GECS. References to GECS, GECC and the GE
Capital segment in this Management’s Discussion and Analysis
relate to the entities or segment as they existed during 2011 and
do not refl ect the February 22, 2012 merger.
We supplement our GAAP net earnings and earnings per share
(EPS) reporting by also reporting an operating earnings and EPS
measure (non-GAAP). Operating earnings and EPS include service
cost and plan amendment amortization for our principal pen-
sion plans as these costs represent expenses associated with
employee benefi ts earned. Operating earnings and EPS exclude
non-operating pension cost/income such as interest cost,
expected return on plan assets and non-cash amortization of
actuarial gains and losses. We believe that this reporting provides
better transparency to the employee benefi t costs of our principal
pension plans and Company operating results.
Overview of Our Earnings from 2009 through 2011
Earnings from continuing operations attributable to the Company
increased 12% in 2011 and 16% in 2010, refl ecting the stabiliza-
tion of overall economic conditions during the last two years,
following the challenging conditions of 2009. Operating earnings
(non-GAAP measure) which exclude non-operating pension costs
increased 20% to $14.8 billion in 2011 compared with $12.3 billion
in 2010. Operating earnings per share (non-GAAP measure)
increased 15% to $1.29 in 2011 compared with $1.12 in 2010.
Operating earnings per share excluding the effects of our pre-
ferred stock redemption (non-GAAP measure) increased 22% to
$1.37 in 2011 compared with $1.12 in 2010. We believe that we
are seeing continued signs of stabilization in much of the global
economy, including in fi nancial services, as GECS earnings from
continuing operations attributable to the Company increased
113% in 2011 and 157% in 2010. Net earnings attributable to the
Company increased 22% in 2011 refl ecting the lack of prior year
losses from discontinued operations and a 12% increase in earn-
ings from continuing operations, after increasing 6% in 2010, as
losses from discontinued operations in 2010 partially offset the
16% increase in earnings from continuing operations. We begin
2012 with a record backlog of $200 billion and expect to continue
our trend of revenue and earnings growth.
Energy Infrastructure (27% and 39% of consolidated three-
year revenues and total segment profi t, respectively) revenues
increased 16% in 2011 primarily as a result of acquisitions dur-
ing 2011 and higher volume due to increased sales of services at
Energy and Oil & Gas, after decreasing 8% in 2010 as the world-
wide demand for new sources of power, such as wind and thermal
declined with the overall economic conditions. Segment profi t
decreased 9% in 2011 primarily on lower productivity, driven
by the wind turbines business, acquisitions and investment in
our global organization and new technology, and lower prices.
Segment profi t increased 2% in 2010 primarily on higher prices
and lower material and other costs. We continue to invest in mar-
ket-leading technology and services at Energy and Oil & Gas.
Aviation (12% and 20% of consolidated three-year revenues
and total segment profi t, respectively) revenues and segment
profi t increased 7% and 6%, respectively, in 2011 and fell 6%