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2012 Annual Report
GE Works

Table of contents

  • Page 1
    GE Works 2012 Annual Report

  • Page 2
    ... U.S. advanced approaches. ² Financial data as of 3Q 2012. GECC information; Peer comparisons using assumptions based on December 2010 guidance and publicly available company data. It does not reï¬,ect the revised guidance issued in January 2013. GECC elevated due to 4Q 2012 maturities; 4Q 2012 LCR...

  • Page 3
    A REAL OPPORTUNITY FOR CHANGE IS HERE, and change will come through a relentless focus on performance and productivity. GE has made strategic decisions in key areas that will drive growth in the Company and create better outcomes for our customers and the world. PICTURED (left to right): Jeffrey R....

  • Page 4
    THE GE WORKS EQUATION We look at what the world needs A belief in a better way Ã- + A relentless drive to invent and build things that matter = A world that works better PICTURED: Leonardo Nogueira de Oliveira (left) and Wellington Pereira dos Santos (right), GE Oil & Gas

  • Page 5
    ...individuals. That is why GE Works. The global economy for 2012 was within our planning scenario, but short of our hopes. Maybe the best news- believe it or not-was Europe. It didn't implode! The U.S. is improving, driven mainly by housing and the consumer, but capital investment remains sluggish. As...

  • Page 6
    ...are closely related to our core. About one-third of our infrastructure revenues comes from businesses we weren't in a decade ago. These include fast-growth businesses like Oil & Gas, Life Sciences, and Distributed Power. This growth has come through organic investment and focused acquisitions. 4 GE...

  • Page 7
    ...time in our history. We have built a company that has high share in growth regions. In 2012, we had $40 billion of orders in growth regions, a 12% increase over the prior year and a threefold increase in the last decade. GE 2012 ANNUAL REPORT 5 DIVIDEND HISTORY TOTAL DOLLAR AMOUNT OF DIVIDENDS PAID...

  • Page 8
    ...to develop membrane distillation technology, which promises to be an effective, energy-efficient solution for treating wastewater generated during the gas extraction process. PICTURED: Ujjwal Kumar (left), GE Oil & Gas; Kent Wilkinson (right), Chesapeake Energy Corporation 6 GE 2012 ANNUAL REPORT

  • Page 9
    ... needs of our customers in growth markets. We have achieved local relevance with global scale. We use the entire GE enterprise to improve the value of our investments in technology and globalization. For technology, we have a "Global Research Center Network" that builds strategic capability, spreads...

  • Page 10
    ... to fabricate lightweight structures using metal additive manufacturing processes that were previously not feasible. We anticipate this will result in millions of dollars in fuel savings for GE's aircraft engine customers every year. PICTURED: Troy Brenner, GE Aviation 8 GE 2012 ANNUAL REPORT

  • Page 11
    ... in software and analytics. We know that industrial companies need to be in the software business. We want to make the analytics around our products, real-time data, and operating solutions a GE core competency. We have built a Software and Analytical Center of Excellence in California, where...

  • Page 12
    ... Solutions portfolio by acquiring RMI, a leading supplier of transportation management systems used by railroads across North America to manage operations, improve information ï¬,ow, increase productivity and reduce cost. PICTURED: Rachna Pitts, Norfolk Southern 10 GE 2012 ANNUAL REPORT

  • Page 13
    PICTURED: ES44AC Evolution Series locomotive GE 2012 ANNUAL REPORT 11

  • Page 14
    ... above the regulatory goals. GE received a $6.4 billion dividend from Capital. Our team has done a great job of reducing commercial real estate exposure, which was $46 billion at year-end, down 50% from its peak. GE Capital continues to outperform regional and money center banks in important areas...

  • Page 15
    .... GE has a strong franchise in China that grew by 19% in 2012. Our advantage is in localization and partnerships. Last year, we opened two customer innovation centers, in Chengdu and Xi'an. At the same time, we are partnering with Chinese state-owned enterprises, achieving global scale. In 2012...

  • Page 16
    .... We estimate that it could save the entire global airline industry more than 1.3 billion gallons of fuel per year, valued at more than $4 billion, and eliminate more than 12.4 million metric tons of carbon dioxide emissions. PICTURED: Daniel Davim Rebello, GE Aviation 14 GE 2012 ANNUAL REPORT

  • Page 17
    ... BENEFIT ANNUALLY 40 PROJECTS TO IMPROVE PROCESSES ACROSS GE 1,000 DEDICATED GE PROFESSIONALS BENEFITS Increases our speed to market Improves the quality of our products and services Significantly reduces costs Drives competitive advantage for our customers and our company our new product...

  • Page 18
    ... focused on developing products and solutions specifically for the China market, we plan to drive further advances in local healthcare and other sectors. Healthcare revenue in GE's nine growth regions $5B $4B $3B $2B $1B $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 $4.6B 16 GE 2012 ANNUAL REPORT

  • Page 19
    ..., the culture of GE Works. We are mission-based. We search for a better way. We drive solutions for our customers and society. We are a "We Company." It is driving accountability for outcomes. It is fostering smart risk-taking and business judgment. You have invested in GE. You know the choices...

  • Page 20
    ...December 2012, allowing GE to bring an essential part of our aviation supply chain in-house BUILDING More than 7,000 customers of GE Capital have used the Access GE program to work directly with our experts to solve their most pressing challenges and find new ways to grow 18 GE 2012 ANNUAL REPORT...

  • Page 21
    ... challenges in order to make the greatest impact: advancing our customers' businesses, driving global economic opportunity, creating shareholder value, and improving people's lives. This is how GE Works-and why we are committed to keep working for the future. CURING GE's installed base of steam...

  • Page 22
    ... as training and promotional programs for RV dealers. Our services have helped drive Jayco's business to AUD$300 million in sales. In Germany, another important market for GE Capital, middle market companies employ 9.4 million people and generate 32.5% of private-sector revenues. The diversified...

  • Page 23
    ... and drive innovation. Our investment will support the goals of Saudi Vision 2020, the government's plan to advance socioeconomic progress by building the capabilities and enhancing the opportunities for its young people. Key areas for investment include a new Saudi-GE Innovation Center in...

  • Page 24
    ... portfolio of products and services to improve mine productivity by transporting materials more efficiently, managing water use, and using advanced software to monitor systems. We are also developing new energy-storage devices such as our Durathon batteries, developed by GE's Global Research Center...

  • Page 25
    ... propulsion systems, as well as vessel automation and satellite positioning systems, for offshore drill ships and support vessels, LNG transport carriers, cruise ships, and navies. 5-10% greater fuel efficiency for offshore vehicles using Diesel-Electric vs. Diesel-Mechanic GE 2012 ANNUAL REPORT...

  • Page 26
    ... projects and the largest single resource development in Australia's history. When completed, Gorgon will produce 15 million tons of liquefied natural gas per year. GE Oil & Gas is providing subsea equipment and compression trains, along with a multi-decade services agreement to keep operations at...

  • Page 27
    ... Global Research Center are working to further enhance the ESP technology GE acquired in 2011. The Path to Flexible, Efficient Power Global electric utilities are generating power more efficiently with our FlexEfficiency™ Advantage Advanced Gas Path (AGP) solution. Korea Southern Power Company...

  • Page 28
    ..., a complaint that has not been adequately addressed since MR was introduced in 1984. PICTURED: Mark Woltjen, Grant Medical Center Lifesaving Innovation on a Molecular Scale GE solutions are helping researchers and medical professionals understand the structure of diseases at a molecular level...

  • Page 29
    ...,000 admissions a year, is using GE Healthcare's advisory services and AgileTracâ„¢ software to improve capacity utilization and enhance the patient experience. GE's Performance Solutions group uses proprietary simulation models to design operational care pathways that balance supply and demand and...

  • Page 30
    The GE Capital Regulatory team guided the Company through a changing regulatory landscape in 2012 Our Oil & Gas team in Aberdeen, Scotland, builds subsea equipment for some of the world's most extreme operating conditions A "WE COMPANY" THIS IS HOW GE WORKS At Appliance Park in Louisville, ...

  • Page 31
    ...General Electric Company, Fairfield, Connecticut. Director since 2000. (pictured on page 1) 1 Audit Committee 2 Management Development and Compensation Committee 3 Nominating and Corporate Governance Committee 4 Public Responsibilities Committee 5 Risk Committee 6 Presiding Director GE 2012 ANNUAL...

  • Page 32
    ... their perspectives on the work environment and key business issues that inï¬,uence company success: innovation, strategy, execution, and customer alignment. Shareowners can be proud that GE's employees score the Company extremely highly when it comes to compliance and trusting executives to do the...

  • Page 33
    ... provide information about our stock performance over the last five years. 144 Glossary ...For your convenience, we also provide a Glossary of key terms used in our financial statements. We also present our financial information electronically at www.ge.com/investor. GE 2012 ANNUAL REPORT 31

  • Page 34
    ...public accounting firm has issued an audit report on our internal control over financial reporting. Their report follows. JEFFREY R. IMMELT KEITH S. SHERIN Chairman of the Board and Chief Executive Officer February 26, 2013 Vice Chairman and Chief Financial Officer 32 GE 2012 ANNUAL REPORT

  • Page 35
    ... Registered Public Accounting Firm To Shareowners and Board of Directors of General Electric Company: We have audited the statement of financial position of General Electric Company and consolidated affiliates (the "Company") as of December 31, 2012 and 2011, and the related statements of earnings...

  • Page 36
    ... productivity and lower prices in the wind turbines business. Oil & Gas (9% and 8% of consolidated three-year revenues and total segment profit, respectively) revenues increased 12% in 2012 primarily as a result of higher volume driven by acquisitions and higher sales of both equipment and services...

  • Page 37
    ... higher volume related to increased equipment sales and services. Segment profit increased over 100% in 2011 as a result of increased productivity, reï¬,ecting improved service margins and higher volume. Home & Business Solutions (5% and 2% of consolidated three-year revenues and total segment pro...

  • Page 38
    ...in 2011, an increase of 15% compared with 2010. Both the sales and operating profit of product services increases were at Oil & Gas, Energy Management, Aviation, Transportation and Healthcare. POSTRETIREMENT BENEFIT PLANS costs were $5.5 billion, $4.1 billion and $3.0 billion in 2012, 2011 and 2010...

  • Page 39
    ...and support certain types of activity. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions. GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax...

  • Page 40
    ... income taxes paid in 2012 were $3.2 billion, reï¬,ecting the effects of changes to temporary differences between the carrying amount of assets and liabilities and their tax bases and the timing of tax payments to governments. The increase in the consolidated effective tax rate from 2010 to 2011 was...

  • Page 41
    ... related to the Company's governance structure and processes and risks arising from related-person transactions. The GE Board's risk oversight process builds upon management's risk assessment and mitigation processes, which include standardized reviews of long-term strategic and operational planning...

  • Page 42
    .... Strategic risk relates to the Company's future business plans and strategies, including the risks associated with the markets and industries in which we operate, demand for our products and services, competitive threats, technology and product innovation, mergers and acquisitions and public policy...

  • Page 43
    ... based on both the Basel 1 U.S. and Basel 3 International frameworks. GE Capital uses stress testing for risk, liquidity and capital adequacy assessment and management purposes, and as an integral part of GE Capital's overall planning processes. Stress testing results inform key strategic portfolio...

  • Page 44
    ... Segments General Electric Company and consolidated affiliates (In millions) 2012 2011 2010 2009 2008 REVENUES (a) Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Home & Business Solutions Total industrial segment revenues GE Capital Total segment revenues Corporate...

  • Page 45
    ... 31, 2011 equipment and service order backlogs were $2.8 billion and $0.8 billion, respectively. See Corporate Items and Eliminations for a discussion of items not allocated to this segment. AVIATION revenues of $20.0 billion increased $1.1 billion, or 6%, in 2012 due primarily to higher prices...

  • Page 46
    ... at December 31, 2012, composed of equipment backlog of 44 GE 2012 ANNUAL REPORT TOTAL ASSETS (In millions) $539,223 2012 $584,536 2011 2010 REVENUES Commercial Lending and Leasing (CLL) Consumer Real Estate Energy Financial Services GE Capital Aviation Services (GECAS) SEGMENT PROFIT (LOSS...

  • Page 47
    ... of $0.2 billion related to our Treasury operations. GE Capital net earnings excluded $0.1 billion of preferred stock dividends declared in 2012. GE Capital revenues decreased 2% and net earnings increased favorably in 2011 as compared with 2010. Revenues for 2011 and 2010 included $0.3 billion...

  • Page 48
    ..., these included $0.4 billion at Healthcare, $0.2 billion at Home & Business Solutions, and $0.1 billion at each of Energy Management, Power & Water and Aviation, primarily for technology and product development costs and restructuring, rationalization and other charges. 46 GE 2012 ANNUAL REPORT

  • Page 49
    ... billion in 2012 and increased revenues by $2.5 billion and $0.5 billion in 2011 and 2010, respectively. GE global revenues, excluding GECC, in 2012 were $57.3 billion, up 5% over 2011. Increases in growth markets of 20% in China, 22% in Australia and New Zealand and 8% in Latin America more than...

  • Page 50
    ...senior secured loans of high-quality, middlemarket companies in a variety of industries. The fair value of investment securities increased to $48.5 billion at December 31, 2012 from $47.4 billion at December 31, 2011, primarily due to the impact of lower interest rates and improved market conditions...

  • Page 51
    ...). Of our total RMBS portfolio at both December 31, 2012 and 2011, approximately $0.5 billion relates to residential subprime credit, primarily supporting our guaranteed investment contracts. A majority of this exposure is related to investment securities backed by mortgage loans originated in 2006...

  • Page 52
    ...economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to...

  • Page 53
    ... and owner-occupied commercial properties. In 2012, we completed the sale of a portion of our Business Properties portfolio. (c) At December 31, 2012, net of credit insurance, about 40% of our Consumer non-U.S. residential mortgage portfolio comprised loans with introductory, below market rates that...

  • Page 54
    ... December 31 2012 2011 Allowance for losses as a percent of nonearning financing receivables 2012 2011 Allowance for losses as a percent of total financing receivables 2012 2011 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE...

  • Page 55
    ... market and the long-term outlook remains uncertain. We have and continue to maintain an intense focus on operations and risk management. Loan loss reserves related to our Real Estate-Debt financing receivables are particularly sensitive to declines in underlying property values. Assuming global...

  • Page 56
    ...LOANS ALLOWANCE FOR LOSSES (SPECIFIC RESERVES) Commercial (a) Real Estate (b) Consumer Total allowance for losses (specific reserves) Average investment during the period Interest income earned while impaired (c) $ 1,349 $16,269 751 $ 2,314 $18,167 733 (a) Includes CLL, Energy Financial Services...

  • Page 57
    ..., principal payment acceleration, changes to collateral or covenant terms and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has...

  • Page 58
    ...decline or impairment in the current environment. (h) Excludes $29.9 billion of cash and equivalents, which is composed of $17.4 billion of cash on short-term placement with highly rated global financial institutions based in Europe, sovereign central banks and agencies or supranational entities, of...

  • Page 59
    ... include primarily purchase obligations for inventory and equipment, payroll and general expenses (including pension funding). We also take into account our capital allocation and growth objectives, including paying dividends, repurchasing shares, investing in research and development and acquiring...

  • Page 60
    ... to maintain a contingency funding plan. The liquidity policy defines GECC's liquidity risk tolerance under different stress scenarios based on its liquidity sources and also establishes procedures to escalate potential issues. We actively monitor GECC's access to funding markets and its liquidity...

  • Page 61
    ... Bank, a Federal Savings Bank (FSB), and GE Capital Financial Inc., an industrial bank (IB). The FSB and IB currently issue certificates of deposit (CDs) in maturity terms from two months to ten years. On January 11, 2013, the FSB acquired the deposit business of MetLife Bank, N.A. This acquisition...

  • Page 62
    ...repayment of their investment should the long-term credit ratings of GECC fall below AA-/Aa3. These obligations are included in long-term borrowings on our Statement of Financial Position. These three consolidated entities ceased issuing GICs in 2010. Following the April 3, 2012 Moody's downgrade of...

  • Page 63
    ...about changes in benefit plans is provided in Note 12. Þ Changes in AOCI related to investment securities increased shareowners' equity by $0.7 billion and $0.6 billion in 2012 and 2011, respectively, reï¬,ecting the effects of lower interest rates and improved market conditions on U.S. corporate...

  • Page 64
    ... our customer-related CFOA. The most significant operating use of cash is to pay our suppliers, employees, tax authorities and others for a wide range of material and services. GE operating cash payments increased by $12.5 billion in 2012 and decreased by $2.0 billion in 2011. These changes are...

  • Page 65
    ... we engage in are similar to those used by many financial institutions. The assets we currently securitize include: receivables secured by equipment, credit card receivables, ï¬,oorplan inventory receivables, GE trade receivables and other assets originated and underwritten by us in the ordinary...

  • Page 66
    ...economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to...

  • Page 67
    ... industry information about expected trends in rental, occupancy and capitalization rates and expected business plans, which include our estimated holding period for the asset. Our portfolio is diversified, both geographically and by asset type. However, the global real estate market is subject...

  • Page 68
    ...-term expected return on those assets for cost recognition in 2013 compared to 8.0% in both 2012 and 2011 and 8.5% in 2010. Changes in key assumptions for our principal pension plans would have the following effects. Þ Discount rate-A 25 basis point increase in discount rate would decrease pension...

  • Page 69
    ...AND HEDGING. We use derivatives to manage a FAIR VALUE MEASUREMENTS. Assets and liabilities measured at fair variety of risks, including risks related to interest rates, foreign exchange and commodity prices. Accounting for derivatives as hedges requires that, at inception and over the term of the...

  • Page 70
    ..., 2011 and 2010, respectively. Aviation accounts for the largest share of GE's research and development expenditures with funding from both GE and customer funds. Power & Water and Healthcare also made significant expenditures funded primarily by GE. Orders and Backlog GE infrastructure equipment...

  • Page 71
    management's discussion and analsis Selected Financial Data The following table provides key information for Consolidated, GE and GECC. (Dollars in millions; per-share amounts in dollars) 2012 2011 2010 2009 2008 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues and other income $...

  • Page 72
    audited financial statements Statement of Earnings General Electric Company and consolidated affiliates For the years ended December 31 (In millions; per-share amounts in dollars) 2012 2011 2010 REVENUES AND OTHER INCOME Sales of goods Sales of services Other income (Note 17) GECC earnings from ...

  • Page 73
    ... from the "General Electric Company and consolidated affiliates" columns on the prior page. Consolidated Statement of Changes in Shareowners' Equity (In millions) 2012 2011 2010 GE SHAREOWNERS' EQUITY BALANCE AT JANUARY 1 Increases from net earnings attributable to the Company Dividends and other...

  • Page 74
    audited financial statements Statement of Financial Position General Electric Company and consolidated affiliates At December 31 (In millions, except share amounts) 2012 2011 ASSETS Cash and equivalents Investment securities (Note 3) Current receivables (Note 4) Inventories (Note 5) Financing ...

  • Page 75
    ... Electric Capital Corporation and all of its affiliates and associated companies. Separate information is shown for "GE" and "GECC." Transactions between GE and GECC have been eliminated from the "General Electric Company and consolidated affiliates" columns on the prior page. GE 2012 ANNUAL REPORT...

  • Page 76
    audited financial statements Statement of Cash Flows General Electric Company and consolidated affiliates For the years ended December 31 (In millions) 2012 2011 2010 CASH FLOWS-OPERATING ACTIVITIES Net earnings Less net earnings attributable to noncontrolling interests Net earnings attributable ...

  • Page 77
    ... of GECC dividends paid to GE. In the consolidating data on this page, "GE" means the basis of consolidation as described in Note 1 to the consolidated financial statements; "GECC" means General Electric Capital Corporation and all of its affiliates and associated companies. Separate information is...

  • Page 78
    ... of transactions between GE and GECC. Þ Operating Segments-These comprise our eight businesses, focused on the broad markets they serve: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. Prior-period information has been...

  • Page 79
    ... pricing strategy of the business and considers product configuration, geography, customer type, and other market specific factors. Except for goods sold under long-term agreements, we recognize sales of goods under the provisions of U.S. Securities and Exchange Commission (SEC) Staff Accounting...

  • Page 80
    ... interest on nonaccrual consumer loans when the customer's account is less than 90 days past due and collection of such amounts is probable. Interest accruals on modified consumer loans that are not considered to be troubled debt restructurings (TDRs) may return to current status (re-aged) only...

  • Page 81
    ...economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to...

  • Page 82
    ... to consolidated financial statements statistical analyses considering historical and projected default rates and loss severity and aging, as well as our view on current market and economic conditions. It is prepared by each respective line of business. For Real Estate, this includes assessing the...

  • Page 83
    ... Annuity Benefits Certain entities, which we consolidate, provide guaranteed investment contracts, primarily to states, municipalities and municipal authorities. Our insurance activities also include providing insurance and reinsurance for life and health risks and providing certain annuity products...

  • Page 84
    ... consolidated financial statements For short-duration insurance contracts, including accident and health insurance, we report premiums as earned income over the terms of the related agreements, generally on a pro-rata basis. For traditional long-duration insurance contracts including long-term care...

  • Page 85
    ...are valued using a discounted cash ï¬,ow model, comparative market multiples or a combination of both approaches as appropriate and other third-party pricing sources. These investments are generally included in Level 3. Investments in private equity, real estate and collective funds are valued using...

  • Page 86
    ... the passage of time and the occurrence of market events since receipt of the information. For real estate, fair values are based on discounted cash ï¬,ow estimates which reï¬,ect current and projected lease profiles and available industry information about capitalization rates and expected trends...

  • Page 87
    ...of 2012, we committed to sell a portion of our Business Properties portfolio (Business Property) in Real Estate, including certain commercial loans, the origination and servicing platforms and the servicing rights on loans previously securitized by GECC. We completed the sale of Business Property on...

  • Page 88
    ... claims activity. Assets at December 31, 2012 and December 31, 2011, primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2017 and in part in 2019, related to the sale of our GE Money Japan business. 86 GE 2012 ANNUAL...

  • Page 89
    ...effect on claims development. GE Money Japan losses from discontinued operations, net of taxes, were $649 million, $238 million and $1,671 million in 2012, 2011 and 2010, respectively. WMC During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially...

  • Page 90
    ..., net of taxes, were $337 million, $34 million and $7 million in 2012, 2011 and 2010, respectively. OTHER FINANCIAL SERVICES In the first quarter of 2012, we announced the planned disposition of Consumer Ireland and classified the business as discontinued operations. We completed the sale in the...

  • Page 91
    ... of individual direct mortgage loans of financial institutions. The fair value of investment securities increased to $48,510 million at December 31, 2012, from $47,374 million at December 31, 2011, primarily due to the impact of lower interest rates and improved market conditions. The following...

  • Page 92
    ...We discount the cash ï¬,ows using the original effective interest rate of the security. The vast majority of our RMBS have investment grade credit ratings from the major rating agencies and are in a senior position in the capital structure of the deal. Of our total RMBS at December 31, 2012 and 2011...

  • Page 93
    ...information about gross realized gains and losses on available-for-sale investment securities follows. (In millions) 2012 2011 2010 Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Home & Business Solutions Corporate items and eliminations Less allowance for losses Total...

  • Page 94
    ...and loans carried at gross book value, which includes finance charges. Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data processing equipment, medical equipment, commercial real estate...

  • Page 95
    ... 2011 Due in 2013 2014 2015 2016 2017 2018 and later Consumer revolving loans Total COMMERCIAL $ 56,668 22,076 19,889 18,214 17,114 48,593 182,554 58,911 $241,465 $ 8,700 6,633 5,235 3,751 2,234 5,236 31,789 - $31,789 CLL Americas Europe Asia Other Total CLL Energy Financial Services GE Capital...

  • Page 96
    ... we completed the sale of a portion of our Business Properties portfolio. Balance at January 1, 2011 Provision charged to operations (a) Balance at December 31, 2011 (In millions) Other (b) Gross write-offs (c) Recoveries (c) COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial...

  • Page 97
    ...financial statements (In millions) Balance at January 1, 2010 (a) Provision charged to operations Other (b) Gross write-offs (c) Recoveries (c) Balance at December 31, 2010 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE...

  • Page 98
    ... The GECAS business of GE Capital recognized impairment losses of $242 million in 2012 and $301 million in 2011 recorded in the caption "Other costs and expenses" in the Statement of Earnings to reflect adjustments to fair value based on an evaluation of average current market values (obtained from...

  • Page 99
    ... 2011 Dispositions, currency exchange and other (In millions) Balance at January 1 Acquisitions Balance at December 31 Balance at January 1 Acquisitions Balance at December 31 Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Home & Business Solutions GE Capital...

  • Page 100
    ... market allowing for sales of real estate investments at normalized margins. Our assumed discount rate was 11% and was derived by applying a capital asset pricing model and corroborated using equity analyst research reports and implied cost of equity based on forecasted price to earnings per share...

  • Page 101
    ... made to dispose of them through sale or other means. At December 31, 2012 and 2011, such assets consisted primarily of loans, aircraft, equipment and real estate properties, and were accounted for at the lower of carrying amount or estimated fair value less costs to sell. These amounts are net of...

  • Page 102
    ... to consolidated financial statements Note 10. Borrowings and Bank Deposits SHORT-TERM BORROWINGS 2012 December 31 (Dollars in millions) Amount Average rate (a) 2011 Amount Average rate (a) GE Commercial paper Payable to banks Current portion of long-term borrowings Other Total GE short-term...

  • Page 103
    ... (a) Life insurance benefits are accounted for mainly by a net-level-premium method using estimated yields generally ranging from 3.0% to 8.5% in both 2012 and 2011. (b) Substantially all unpaid claims and claims adjustment expenses and unearned premiums. December 31, 2012 Total Active employees...

  • Page 104
    notes to consolidated financial statements COST OF PENSION PLANS Total (In millions) 2012 2011 2010 Principal pension plans 2012 2011 2010 Other pension plans 2012 2011 2010 Service cost for benefits earned Prior service cost amortization Expected return on plan assets Interest cost on benefit ...

  • Page 105
    ... 10% of the fair value of trust assets at the time of purchase. GE securities represented 4.2% and 3.8% of trust assets at year-end 2012 and 2011, respectively. The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities, real estate and hedge...

  • Page 106
    ... to consolidated financial statements The following table presents GE Pension Plan investments measured at fair value. 2012 December 31 (In millions) Level 1 Level 2 Level 3 Total Level 1 2011 Level 2 Level 3 Total EQUITY SECURITIES U.S. equity securities (a) Non-U.S. equity securities (a) DEBT...

  • Page 107
    ... salaried employees who retire after that date. These plans cover approximately 205,000 retirees and dependents. COST OF PRINCIPAL RETIREE BENEFIT PLANS (In millions) 2012 2011 2010 Funded status (a) (b) $(18,764) Pension asset (liability) recorded in the Statement of Financial Position Pension...

  • Page 108
    ... FAIR VALUE OF PLAN ASSETS (In millions) 2012 2011 Funded status (a) Liability recorded in the Statement of Financial Position Retiree health plans Due within one year Due after one year Retiree life plans Net liability recognized Amounts recorded in shareowners' equity (unamortized) Prior service...

  • Page 109
    ... and credits applied against GE's current U.S. tax expense. Consolidated current tax expense amounts applicable to non-U.S. jurisdictions were $2,895 million, $4,657 million and $3,132 million in 2012, 2011 and 2010, respectively. Consolidated deferred taxes related to U.S. federal income taxes were...

  • Page 110
    ... the event the provision is not extended after 2013, the current U.S. tax imposed on active financial services income earned outside the United States would increase, making it more difficult for U.S. financial services companies to compete in global markets. If this provision is not extended, we...

  • Page 111
    ... TAX RATE Consolidated 2012 2011 2010 2012 GE 2011 2010 2012 GECC 2011 2010 U.S. federal statutory income tax rate Increase (reduction) in rate resulting from inclusion of after-tax earnings of GECC in before-tax earnings of GE Tax on global activities including exports NBCU gain Business Property...

  • Page 112
    ... $1,031 million ($806 million related to our preferred stock redemption) and $300 million of dividends on preferred stock in 2011 and 2010, respectively. (d) Included the effects of accretion of redeemable securities to their redemption value of $38 million in 2010. 110 GE 2012 ANNUAL REPORT

  • Page 113
    ... to be settled through physical share issuance. The terms of the warrants were amended in January 2013 to allow for net share settlement where the total number of issued shares is based on the amount by which the average market price of GE common stock over the 20 trading days preceding the date of...

  • Page 114
    notes to consolidated financial statements ACCUMULATED OTHER COMPREHENSIVE INCOME (In millions) 2012 2011 2010 INVESTMENT SECURITIES Balance at January 1 OCI before reclassifications-net of deferred taxes of $387, $341 and $72 (a) Reclassifications from OCI-net of deferred taxes of $13, $1 and $...

  • Page 115
    ... payment made in December 2012. GECC preferred stock is presented as noncontrolling interests in the GE Consolidated Statement of Financial Position. During 2012, GECC paid dividends of $1,926 million and special dividends of $4,500 million to GE. No dividends were paid during 2011 or 2010. Options...

  • Page 116
    ...exercised during 2012, 2011 and 2010 was $88 million, $21 million and $7 million, respectively. OTHER STOCK-BASED COMPENSATION STOCK OPTION ACTIVITY Weighted average remaining contractual term (In years) Shares (In thousands) Weighted average exercise price Aggregate intrinsic value (In millions...

  • Page 117
    ... option and restricted stock grants. Note 18. GECC Revenues from Services (In millions) 2012 2011 2010 Interest on loans Equipment leased to others Fees Investment income (a) Financing leases Associated companies (b) Premiums earned by insurance activities Real estate investments Other items...

  • Page 118
    notes to consolidated financial statements GE's selling, general and administrative expenses totaled $17,672 million in 2012, $17,556 million in 2011 and $16,340 million in 2010. The increase in 2012 is primarily due to increased acquisition-related costs, offset by the effects of global cost ...

  • Page 119
    ... additional information on the composition of our derivative portfolio. (e) Included private equity investments and loans designated under the fair value option. (f) Primarily represented the liability associated with certain of our deferred incentive compensation plans. GE 2012 ANNUAL REPORT 117

  • Page 120
    ... to consolidated financial statements The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended December 31, 2012 and 2011, respectively. The majority of our Level 3 balances consist of investment securities classified as available-for-sale...

  • Page 121
    ... real estate funds of $(33) million and $(24) million during 2012 and 2011, respectively. (b) Includes impairments related to real estate equity properties and investments recorded in other costs and expenses of $218 million and $976 million during 2012 and 2011, respectively. GE 2012 ANNUAL REPORT...

  • Page 122
    ... receivables and loans held for sale Cost and equity method investments Long-lived assets, including real estate (a) Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase in the discount rate would...

  • Page 123
    ...31, 2012 and 2011. A description of how we estimate fair values follows. Loans Based on a discounted future cash ï¬,ows methodology, using current market interest rate data adjusted for inherent credit risk or quoted market prices and recent transactions, if available. Borrowings and bank deposits...

  • Page 124
    ..., currency or market risk between financial assets and liabilities in our financial services businesses. The remaining derivative activities primarily relate to hedging against adverse changes in currency exchange rates and commodity prices related to anticipated sales and purchases and contracts...

  • Page 125
    ... as economic hedges of changes in interest rates, currency exchange rates, commodity prices and other risks. Gains or losses related to the derivative are typically recorded in GECC revenues from services or other income, based on our accounting policy. In general, the earnings effects of the item...

  • Page 126
    ... December 31 (In millions) 2012 2011 Note 23. CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial financing receivables, before allowance for losses Non-impaired financing receivables General reserves Impaired loans Specific reserves PAST DUE FINANCING...

  • Page 127
    ... principal balance Average investment in loans Recorded investment in loans With a specific allowance Unpaid principal balance Associated allowance Average investment in loans December 31 (In millions) 2012 CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total 2011...

  • Page 128
    notes to consolidated financial statements CREDIT QUALITY INDICATORS Secured December 31 (In millions) A B C Total Substantially all of our Commercial financing receivables portfolio is secured lending and we assess the overall quality of the portfolio based on the potential risk of loss measure...

  • Page 129
    ...consolidated financial statements Real Estate FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES The following table provides further information about general and specific reserves related to Real Estate financing receivables. Financing receivables December 31 (In millions) 2012 2011 Debt Business...

  • Page 130
    ... consideration that compensates us for the value of the concession. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has typically resulted in the conclusion that the modified terms are not at current market rates of...

  • Page 131
    ... programs primarily include interest rate reductions and payment deferrals in excess of three months, which were not part of the terms of the original contract, and are primarily concentrated in our non-U.S. residential mortgage and U.S. credit card portfolios. For the year ended December 31, 2012...

  • Page 132
    ... in Consumer-Other comprises loans to small and medium-sized enterprises predominantly secured by auto and equipment, inventory finance and cash ï¬,ow loans. We develop our internal risk ratings for this portfolio in a manner consistent with the process used to develop our Commercial credit quality...

  • Page 133
    ... two consolidated entities that hold investment securities, the majority of which are investment grade, and were funded by the issuance of GICs. The GICs included conditions under which certain holders could require immediate repayment of their investment should the long-term credit ratings of...

  • Page 134
    notes to consolidated financial statements The table below summarizes the assets and liabilities of consolidated VIEs described above. Consolidated Securitization Entities December 31 (In millions) Trinity (a) Credit cards (b) Equipment (b) Real estate (c) Trade receivables Other Total 2012 ASSETS...

  • Page 135
    ... issued by a senior secured loan fund, which invests in high quality senior secured debt of various middle-market companies ($5,030 million). Other significant unconsolidated VIEs include investments in real estate entities ($2,639 million), which generally consist of passive limited partnership...

  • Page 136
    ... customer acquisitions of aircraft equipped with our engines, including commitments made to airlines in 2012 for future sales under our GE90 and GEnx engine campaigns. The GECAS business of GE Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft with list prices...

  • Page 137
    ...496 35,475 Purchases of securities by insurance activities Dispositions and maturities of securities by insurance activities Other assets-investments Change in other receivables Other NEWLY ISSUED DEBT (MATURITIES LONGER THAN 90 DAYS) $ $ 11,701 Short-term (91 to 365 days) Long-term (longer than...

  • Page 138
    ... million have been eliminated from consolidated cash from investing activities for 2012, 2011 and 2010, respectively. Operating Segments Basis for Presentation Our operating businesses are organized based on the nature of markets and customers. Segment accounting policies are the same as described...

  • Page 139
    ...private label credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt consolidation; home equity loans; deposit and other savings products; and small and medium enterprise lending on a global basis. Real Estate offers a comprehensive range of capital and investment solutions...

  • Page 140
    ... $1,539 million to segment pre-tax income of Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital operating segments, respectively, for the year ended December 31, 2012. Aggregate summarized financial information for significant...

  • Page 141
    ...to consolidated financial statements Note 29. Quarterly Information (Unaudited) First quarter (In millions; per-share amounts in dollars) 2012 2011 Second quarter 2012 2011 Third quarter 2012 2011 Fourth quarter 2012 2011 CONSOLIDATED OPERATIONS Earnings from continuing operations Earnings (loss...

  • Page 142
    ... pension costs (income) • Industrial segment organic revenues • Average GE shareowners' equity, excluding effects of discontinued operations • Ratio of debt to equity at GECC, net of cash and equivalents and with classification of hybrid debt as equity • GE Capital ending net investment...

  • Page 143
    ... 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 measure of the operational results of our business. Other components of GAAP pension cost are mainly driven by capital...

  • Page 144
    ... information Industrial Segment Organic Revenues (Dollars in millions) 2012 2011 V% Consolidated revenues Less GE Capital revenues Less Corporate items and eliminations Industrial segment revenues Less the effects of: Acquisitions, business dispositions (other than dispositions of businesses...

  • Page 145
    ... that all quarterly dividends were reinvested. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2012. FIVE-YEAR FINANCIAL PERFORMANCE (In dollars) 2007 2008 2009 2010 2011 2012 GE Pre-Tax Earnings from Continuing...

  • Page 146
    ... services). BORROWING Financial liability (short or long-term) that obligates us FINANCING RECEIVABLES Investment in contractual loans and leases due from customers (not investment securities). FORWARD CONTRACT Fixed price contract for purchase or sale of a specified quantity of a commodity...

  • Page 147
    ..., the internally modeled scores are more reï¬,ective of the behavior and default risks in the portfolio compared to stand-alone generic bureau scores. TURNOVER Broadly based on the number of times that working capital is replaced during a year. Current receivables turnover is total sales divided by...

  • Page 148
    ... Frankfurt Stock Exchange. TRADING AND DIVIDEND INFORMATION Common Stock Market Price (In dollars) High Low The 2012 GE Annual Report is available online at www.ge.com/ annualreport . For detailed news and information regarding our strategy and our businesses, please visit our Press Room online at...

  • Page 149
    ..., produced with GE's wind and biogas technologies, and powered by GE steam engines and turbine engines. Visit our interactive online annual report at www.ge.com/annualreport Thanks to the customers, partners and GE employees who appear in this annual report for contributing their time and support.

  • Page 150
    General Electric Company Fairfield, Connecticut 06828 www.ge.com 3.EPC055148101A.103