GE 2012 Annual Report Download - page 143

Operating Earnings, Operating EPS and Operating EPS Excluding the Effects of the 2011 Preferred Stock Redemption
(In millions; except earnings per share) 2012 2011 2010 2009 2008
Earnings from continuing operations attributable to GE $14,679 $14,227 $12,613 $10,881 $17,786
Adjustment (net of tax): non-operating pension costs (income) 1,386 688 (205) (967) (915)
Operating earnings $16,065 $14,915 $12,408 $ 9,914 $16,871
EARNINGS PER SHARE—DILUTED
(a)
Continuing earnings per share $ 1.39 $ 1.24 $ 1.15 $ 0.99 $ 1.75
Adjustment (net of tax): non-operating pension costs (income) 0.13 0.06 (0.02) (0.09 ) (0.09)
Operating earnings per share 1.52 1.31 1.13 0.90 1.66
Less effects of the 2011 preferred stock redemption — 0.08 — — —
Operating EPS excluding the effects of the 2011 preferred stock redemption $ 1.52 $ 1.38 $ 1.13 $ 0.90 $ 1.66
(a) Earnings-per-share amounts are computed independently. As a result, the sum of per-share amounts may not equal the total.
Industrial Operating Earnings
(Dollars in millions) 2012
Earnings from continuing operations attributable to GE $14,679
Adjustments (net of tax): non-operating pension
costs (income) 1,386
Operating earnings 16,065
Less GECC earnings from continuing operations
attributable to the Company 7,401
Less effect of GECC preferred stock dividends (123)
Operating earnings excluding GECC earnings from
continuing operations and the effect of GECC preferred
stock dividends (Industrial operating earnings) $ 8,787
Industrial operating earnings as a percentage
of operating earnings 55%
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 princi-
pal pension plans are included in operating earnings. We believe
that these components of pension cost better reflect the ongo-
ing 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 mea-
sure of the operational results of our business. Other components
of GAAP pension cost are mainly driven by capital allocation deci-
sions 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 pen-
sion 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 believe that presenting operating earnings separately for our
industrial businesses also provides management and investors
with useful information about the relative size of our industrial
and financial services businesses in relation to the total company.
We also believe that operating EPS excluding the effects of the
$0.8 billion preferred dividend related to the redemption of our
preferred stock (calculated as the difference between the car-
rying value and the redemption value of the preferred stock) is
a meaningful measure because it increases the comparability of
period-to-period results.
Operating and Non-Operating Pension Costs (Income)
(In millions) 2012 2011 2010
Service cost for benefits earned $ 1,387 $ 1,195 $ 1,149
Prior service cost amortization 279 194 238
Operating pension costs 1,666 1,389 1,387
Expected return on plan assets (3,768) (3,940) (4,344)
Interest cost on benefit obligations 2,479 2,662 2,693
Net actuarial loss amortization 3,421 2,335 1,336
Non-operating pension costs
(income) 2,132 1,057 (315)
Total principal pension plans costs $ 3,798 $ 2,446 $ 1,072
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 reflect the ongo-
ing 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 manage-
ment 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 2012 ANNUAL REPORT 141
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