GE 2014 Annual Report Download - page 50

30 GE 2014 FORM 10-K
MD&A SEGMENT OPERATIONS
SEGMENT OPERATIONS
SEGMENT REVENUES AND PROFIT
Segment revenues include both revenues and other income related to the segment.
Segment profit is determined based on internal performance measures used by the Chief Executive Officer (CEO) to assess
the performance of each business in a given period. In connection with that assessment, the CEO may exclude matters such
as charges for restructuring; rationalization and other similar expenses; acquisition costs and other related charges;
technology and product development costs; certain gains and losses from acquisitions or dispositions; and litigation
settlements or other charges, for which responsibility preceded the current management team.
Segment profit excludes results reported as discontinued operations and accounting changes. Segment profit also excludes
the portion of earnings or loss attributable to noncontrolling interests of consolidated subsidiaries, and as such only includes
the portion of earnings or loss attributable to our share of the consolidated earnings or loss of consolidated subsidiaries.
Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular
segment’s management is measured:
x Interest and other financial charges and income taxes are excluded in determining segment profit (which we sometimes
refer to as “operating profit”) for the industrial segments.
x Interest and other financial charges and income taxes are included in determining segment profit (which we sometimes
refer to as “net earnings”) for the GE Capital segment.
Certain corporate costs, such as shared services, employee benefits and information technology are allocated to our
segments based on usage. A portion of the remaining corporate costs are allocated based on each segment’s relative net cost
of operations.
Effective in the second quarter of 2014, we began including the effects of the GECC preferred stock dividends in our GE
Capital segment. Previously, such dividends had been reported in the caption “Corporate items and eliminations” in the
Company’s Summary of Operating Segments table. Presenting GE Capital segment results including the effects of the GECC
preferred stock dividends is consistent with the way management measures the results of our financial services business.
Prior-period segment information has been recast to be consistent with how we currently evaluate the performance of the GE
Capital segment.
POTENTIAL ACQUISITIONS IMPACTING MULTIPLE SEGMENTS
GE’s offer to acquire the Thermal, Renewables and Grid businesses of Alstom for approximately €12.4 billion (to be adjusted
for the assumed net cash or liability at closing) was positively recommended by Alstom’s board of directors. In addition, GE,
Alstom and the French Government signed a memorandum of understanding for the formation of three joint ventures in grid
technology, renewable energy, and global nuclear and French steam power and Alstom will invest approximately €2.6 billion in
these joint ventures. In the fourth quarter of 2014, Alstom completed its review of the proposed transaction with the works
council and obtained approval from its shareholders. Also in the fourth quarter of 2014, GE and Alstom entered into an
amendment to the original agreement where GE has agreed to pay Alstom a net amount of approximately €0.3 billion of
additional consideration at closing. In exchange for this funding, Alstom has agreed to extend the trademark licensing of the
Alstom name from 5 years to 25 years as well as other contractual amendments. The proposed transaction continues to be
subject to regulatory approvals. The transaction is targeted to close in 2015. The acquisition and alliances will impact our
Power & Water and Energy Management segments.