GE 2014 Annual Report Download - page 119

GE 2014 FORM 10-K 99
MD&A SUPPLEMENTAL INFORMATION
INDUSTRIAL RETURN ON TOTAL CAPITAL (INDUSTRIAL ROTC)
December 31 (In millions) 2014 2013
Earnings from continuing operations $ 15,457 $ 15,475
Less GECC earnings from continuing operations 7,503 8,311
Plus GE after-tax interest(a) 1,026 866
Adjusted Industrial return $ 8,980 $ 8,030
Average GE shareholders' equity, excluding effects of discontinued operations(b) $ 132,081 $ 124,668
Less average GECC shareholders' equity, excluding effects of discontinued operations(b) 85,403 83,450
Avera
g
e Industrial shareholders' e
q
uit
y,
excludin
g
effects of discontinued o
p
erations 46
,
678 41
,
218
Plus average debt (b) 15,770 13,665
Plus other, net(c) 1,743 1,367
Adjusted Industrial capital $ 64,191 $ 56,250
Industrial ROTC 14.0 % 14.3 %
(a) GE interest at a 35% tax rate.
(b) On an annual basis, calculated using a five-point average.
(c) Includes average noncontrolling interests, calculated using a five-point average partially offset by the estimated value of assets held by GE to support GECC.
Our Industrial ROTC calculation excludes earnings (losses) of discontinued operations from the numerator. We believe that
this is a clearer way to measure the ongoing trend in return on Industrial capital for the continuing operations of the business to
the extent that discontinued operations have affected our reported results. Our Industrial shareowners’ equity used in the
denominator is adjusted for debt, noncontrolling interests and the estimated value of assets held by the GE parent to support
GECC. We believe that these adjustments provide a more meaningful denominator in measuring the return on our industrial
businesses. Industrial ROTC was 14.0% in 2014 versus 14.3% in 2013. In 2014, a 12% increase in the adjusted Industrial
return was more than offset by a 14% increase in the adjusted Industrial capital. This increase in capital was principally driven
by an increase in year-end 2013 discount rates, which reduced the pension deficit. Our calculation of the return on Industrial
capital may not be directly comparable to similarly titled measures reported by other companies. We believe that the
adjustments described above result in a more relevant measure for management and investors to evaluate performance of our
Industrial continuing operations, on a consistent basis, and to evaluate and compare the performance of our Industrial
continuing operations with the continuing operations of other businesses and companies.