GE 2015 Annual Report Download - page 132

MD&A SUPPLEMENTAL INFORMATION
104 GE 2015 FORM 10-K
AVERAGE GE CAPITAL SHAREOWNERS' EQUITY, EXCLUDING EFFECTS OF DISCONTINUED OPERATIONS(a)
(In millions) 2015 2014 2013 2012 2011
$
YHUDJH*(&DSLWDOVKDUHRZQHUV¶HTXLW\D $ 67,930 $ 85,370 $ 83,358 $ 79,873 $ 73,852
Less the effects of the average net
investment in discontinued operations 28,028 45,589 45,023 41,504 30,239
$
YHUDJH*(&DSLWDOVKDUHRZQHUV¶HTXLW\
excluding effects of discontinued operations(b) $ 39,902 $ 39,781 $ 38,335 $ 38,369 $ 43,613
(a) On an annual basis, calculated using a five-point average.
(b) Used for computing Industrial return on total capital (ROTC).
Our Industrial ROTC calculation excludes earnings (losses) of discontinued operations from the numerator because GAAP requires us
WRGLVSOD\WKRVHHDUQLQJVORVVHVLQWKH6WDWHPHQWRI(DUQLQJV2XUFDOFXODWLRQRIDYHUDJH*(&DSLWDOVKDUHRZQHUV¶HTXLW\PDy not be
directly comparable to similarly titled measures reported by other companies. We believe that it is a clearer way to measure the ongoing
trend in return on total capital for the continuing operations of our businesses given the extent that discontinued operations have
affected our reported results. We believe that this results in a more relevant measure for management and investors to evaluate
performance of our continuing operations, on a consistent basis, and to evaluate and compare the performance of our continuing
operations with the ongoing operations of other businesses and companies.
INDUSTRIAL RETURN ON TOTAL CAPITAL (INDUSTRIAL ROTC)
(Dollars in millions) 2015 201
4
2013 2012 2011
Earnings from continuing operations $ 1,700 $ 9,490 $ 7,881 $ 8,816 $ 9,301
Less GE Capital earnings (loss) from continuing
operations (7,718) 1,537 716 1,378 1,493
Plus GE after-tax interest 1,262 1,026 865 880 845
A
djusted Industrial return $ 10,680 $ 8,979 $ 8,030 $ 8,318 $ 8,653
A
verage GE shareholders' equity, excluding effects
of discontinued operations(a) $ 83,230 $ 86,459 $ 79,553 $ 79,002 $ 84,159
Less average GE Capital's shareholders' equity,
excluding effects of discontinued operations(a) 39,902 39,781 38,335 38,369 43,613
A
verage Industrial shareholders' equity, excluding
effects of discontinued operations 43,328 46,678 41,218 40,633 40,546
Plus average debt(a) 18,465 15,770 13,665 12,908 10,734
Plus other, net(b) 1,536 1,743 1,367 (1,106) 5,682
A
djusted Industrial capital $ 63,329 $ 64,191 $ 56,250 $ 52,435 $ 56,962
Industrial ROTC 16.9 % 14.0 % 14.3 % 15.9 % 15.2 %
(a) On an annual basis, calculated using a five-point average.
(b) Includes average noncontrolling interests, calculated using a five-point average partially offset by the estimated value of assets held by GE to
support GE Capital.
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
GLVFRQWLQXHGRSHUDWLRQVKDYHDIIHFWHGRXUUHSRUWHGUHVXOWV2XU,QGXVWULDOVKDUHRZQHUV¶HTXLW\XVHGLQWKHGHQRPLQDWRULVDGMusted for
debt, redeemable noncontrolling interests, noncontrolling interests and the estimated value of assets held by the GE parent to support
GE Capital. We believe that these adjustments provide a more meaningful denominator in measuring the return on our industrial
businesses. Industrial ROTC was 16.9% in 2015 versus 14.0% in 2014 and 14.3% in 2013. In 2015, a 19% increase in the adjusted
Industrial return was combined with a 1% decrease in the adjusted Industrial capital. This decrease in capital was principally driven by
share buybacks and foreign currency translation exposure due to the strengthening U.S dollar. 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.
104 GE 2015 FORM 10-K