GE 2013 Annual Report Download - page 36

34 GE 2013 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
Corporation (GECC or fi nancial services). Unless otherwise indi-
cated by the context, we use the terms “GE” and “GECC” on the
basis of consolidation described in Note 1.
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 2011 through 2013, Global
Risk Management, Segment Operations, Geographic Operations
and Environmental Matters. Unless otherwise indicated, we refer
to captions such as revenues and other income and earnings
from continuing 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. Discussion of GECC’s total
assets excludes deferred income tax liabilities, which are pre-
sented as assets for purposes of our consolidating balance sheet
presentations for this fi ling.
We supplement our GAAP net earnings and earnings per
share (EPS) reporting by also reporting operating earnings and
operating EPS (non-GAAP measures). Operating earnings and
operating EPS include service costs and plan amendment amor-
tization for our principal pension plans as these costs represent
expenses associated with employee benefi ts earned. Operating
earnings and operating EPS exclude non-operating pension
cost/income such as interest costs, 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 2011 through 2013
Earnings from continuing operations attributable to the Company
increased 4% to $15.2 billion in 2013 and increased 4% to
$14.6 billion in 2012, refl ecting strong industrial segment growth
and continued stabilization in fi nancial services during the last
two years. Operating earnings (non-GAAP measure), which
exclude non-operating pension costs, increased 5% to $16.9 bil-
lion in 2013 compared with an 8% increase to $16.0 billion in
2012. EPS from continuing operations increased 7% to $1.47 in
2013 compared with a 12% increase to $1.38 in 2012. Operating
EPS (non-GAAP measure) increased 9% to $1.64 in 2013 com-
pared with a 16% increase to $1.51 in 2012. Net earnings
attributable to the Company decreased 4% in 2013 refl ecting a
4% increase in earnings from continuing operations, more than
offset by an increase in losses from discontinued operations. Net
earnings attributable to the Company decreased 4% in 2012
refl ecting losses from discontinued operations, partially offset
by an increase of 4% in earnings from continuing operations.
We begin 2014 with a record backlog of $244 billion, continue to
invest in market-leading technology and services and expect to
continue industrial segment revenue and earnings growth.
Power & Water (18% and 23% of consolidated three-year rev-
enues and total segment profi t, respectively) revenues decreased
13% in 2013 primarily as a result of lower volume and the effects
of the stronger U.S. dollar, partially offset by higher prices and
other income. Revenues increased 10% in 2012 primarily as
higher volume and other income were partially offset by the
effects of the stronger U.S. dollar and lower prices. Segment
profi t decreased 8% in 2013 primarily driven by lower volume and
lower cost productivity, partially offset by the effects of defl ation,
higher prices and other income. Segment profi t increased 8%
in 2012 as higher volume, increased other income and defl ation
were partially offset by lower prices, lower productivity and the
stronger U.S. dollar.
Oil & Gas (10% and 8% of consolidated three-year revenues
and total segment profi t, respectively) revenues increased 11%
in 2013 primarily as a result of higher volume and higher prices.
Revenues increased 12% in 2012 as higher volume (driven by
acquisitions) and higher sales of both equipment and services
were partially offset by the stronger U.S. dollar. Segment profi t
increased 13% in 2013 primarily on higher volume and higher
prices, partially offset by lower cost productivity. Segment profi t
increased 16% in 2012 on higher volume and increased produc-
tivity, partially offset by the effects of the stronger U.S. dollar.
Energy Management (5% and less than 1% of consolidated
three-year revenues and total segment profi t, respectively)
revenues increased 2% in 2013 as higher volume was partially
offset by the effects of the stronger U.S. dollar. In 2012, reve-
nues increased 15% as a result of higher volume primarily from
acquisitions, higher prices and increased other income, partially
offset by the effects of the stronger U.S. dollar. Segment profi t
decreased 16% in 2013 primarily driven by lower productivity.
Segment profi t increased 68% in 2012 primarily driven by higher
prices and increased other income.
Aviation (14% and 17% of consolidated three-year revenues
and total segment profi t, respectively) revenues increased 10%
in 2013 on higher volume and higher prices primarily driven by
higher services and equipment sales in commercial spares and
commercial engines, respectively. In 2012, Aviation revenues
increased 6% as a result of higher prices and higher volume
driven by increased commercial and military engine sales.
Segment profi t increased 16% in 2013 as a result of higher prices,
higher volume and increased other income, partially offset by
the effects of infl ation and lower productivity. Segment profi t
increased 7% in 2012 as higher prices and higher volume were
partially offset by the effects of infl ation and lower productivity.