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GE Works

Table of contents

  • Page 1
    Progress GE Works 2013 2 013 A Annual nnual R Report eport

  • Page 2
    ON THE COVER: Shana Sands, GE Power & Water, Greenville, South Carolina. Turbine is destined for Djelfa, Algeria. PICTURED: Lyman Jerome, GE Aviation Focusing our best capabilities on what matters most to our investors, employees, customers and the world's progress. PICTURED, PAGE 1 Back row (left...

  • Page 3
    ... NBCUniversal deal-related taxes GE Scorecard Industrial Segment Profit Growth Cash from GE Capital Margin Growth Cash Returned to Investors 5% $6B 60bps $18.2B Return on Total Capital GE Capital Tier 1 Common Ratio GE Year-End Market Capitalization GE Rank by Market Capitalization 11.3% 11...

  • Page 4
    ... the business and our customers. This has created trust and loyalty for GE that is unmatched. In 2008, during the depth of the financial crisis, we substantially increased our investment in commercial engine R&D. Because we made the right bets, we have the best products at the right time, securing...

  • Page 5
    ... WORKS ORKS S EQUATION EQ QUATION rele entless A relentless dr rive to to invent drive d build things and that matter that lo ook at We look wh hat t the what world needs Ã- A belief belie ef in a better bet tter y way + = A world world works that w orks better bet tter GE 2013 ANNUAL REPORT...

  • Page 6
    ... value our technical depth. Our products are the heart of our customers' operations. GE's highperformance locomotive improves profitability and safety at a railroad. And, our unique breadth makes GE a desirable partner. In Russia, we are investing across five business segments. We are building...

  • Page 7
    .... For instance, we opened a new business-process center in Saudi Arabia that will employ thousands of local women. This is good for GE, while making us an integral part of the Kingdom's economy. Last year, growth market orders passed $40 billion and grew by 11%. Our revenues exceed $1 billion in 24...

  • Page 8
    ... aviation, energy and healthcare. We link our Capital customers to GE through a program called "Access GE," through which we share our best practices to help them run their businesses better. GE Capital has never been stronger or safer, and we are making substantial investments to meet the standards...

  • Page 9
    ...supply with demand. GE can participate in every step of the gas value chain. The new drivers of productivity represent a trio of "only GE" applications. We are the only company that is linking iron and data. We are uniquely positioned to lead in advanced manufacturing. And, we can create the "total...

  • Page 10
    ... 20%, while increasing its number of new products and growing share. Our Healthcare business has eliminated one-third of its P&Ls, while improving customer responsiveness. We are creating more value with lower cost. All processes are faster. We have combined the principles of Lean Six Sigma with the...

  • Page 11
    ... our Aviation services business, 75% of the ï¬,ow commercial deals are approved in the regions with quick turnaround. Our Company is beginning to feel the market speed. In a digital world, the major source of scale advantage derives from a lean backroom structure with a foundation of information. GE...

  • Page 12
    ... Flow Measurement HEALTHCARE Diagnostic Software & Imaging AVIATION Valve Coatings & Advanced Materials POWER & WATER Water Injection & Processing ENERGY MANAGEMENT Power Transmission & Distribution GLOBAL RESEARCH CENTER Flow Assurance & Advanced Riser Technologies 10 GE 2013 ANNUAL REPORT

  • Page 13
    ... in Healthcare, and Cameron's reciprocating compressor business in Oil & Gas. Both fit our model of opportunistic purchases where GE adds value through technology, global distribution and supply chain scale. Importantly, they allow us to complete market solutions for our customers. Our plans for...

  • Page 14
    PICTURED AT RIGHT: Maria Cioce and Marco Cipriani, Avio Aero, a GE Aviation business 12 GE 2013 ANNUAL REPORT

  • Page 15
    ... is a commitment we make to our customers, employees, shareholders and the world. "We want to be a company that is always getting better. A company that understands where it fits in the markets and in society and appreciates its responsibility to both." -Jeffrey R. Immelt GE 2013 ANNUAL REPORT 13

  • Page 16
    ...Centers 35,800 Patents Filed Since 2000 45,000 Engineers Sales + 50,000 Service Factories in Growth Markets People 100+ 50+ Service Shops in Growth Markets 10,700 Customers Using Access GE PICTURED: Engine Alliance engine, a joint venture between GE and Pratt & Whitney 14 GE 2013 ANNUAL REPORT

  • Page 17
    Scale of an Infrastructure Leader GE builds, moves, powers and cures the world. We are the global leader in infrastructure, developing and changing markets. For example, GE Aviation's portfolio of engine technologies is helping improve air travel for customers in the Middle East. At the 2013 Dubai ...

  • Page 18
    ... development. Working with the state-owned railroad company, Kazakhstan Temir Zholy (KTZ), we helped it build an assembly plant in Astana, Kazakhstan, that is now delivering state-ofthe-art Evolution Series locomotives while also creating local job opportunities. Under a long-term service agreement...

  • Page 19
    ...opportunity, and GE Capital is dedicated to helping them grow. Our annual Middle-Market Summits, co-sponsored with The Ohio State University, have enabled thousands of midsize customers to interact with top executives and academics to explore new ways to build their businesses. And through Access GE...

  • Page 20
    ... manufacturing techniques, and by taking a leadership position in the age of natural gas. PICTURED: GE launched the first "brilliant" wind turbine in 2013. Using the Industrial Internet to analyze data, it can talk to service technicians and even to other wind turbines. 18 GE 2013 ANNUAL REPORT

  • Page 21
    CUSTOMER POWER OF 1% 1% Reduction in Fuel = Aviation Savings $30B Power Savings $66B 1% Reduction in System Inefficiencies = Rail Savings $27B Healthcare Savings $63B 1% Reduction in Capital Expenditures = Oil & Gas Savings $90B Savings reflected over a 15-year period GE 2013 ANNUAL REPORT 19

  • Page 22
    ...turbine operating data. It can deliver industry-leading upgrade performance, reduce fuel consumption and extend the life of turbine assets. The result for DUBAL was 3.4% higher output and a 1.5% increase in fuel efficiency, which helped expand production and reduce costs. 20 GE 2013 ANNUAL REPORT

  • Page 23
    ...Software Center in San Ramon, California, designed to connect hard assets like trains to the Industrial Internet. By analyzing performance data, the RailConnect 360 M&D system enables proactive repairs and more informed routing decisions for customers like Vale, a global mining company headquartered...

  • Page 24
    ... Center on specialized tools to shape advanced materials, such as titanium aluminide. Advanced manufacturing is improving our financial performance: A $75 million investment in Rutland's expansion led to more than $300 million in engine production savings. 22 GE 2013 ANNUAL REPORT PICTURED...

  • Page 25
    ... Co. The engines reduce the company's reliance on coal for power generation while increasing reliability through distributed power. Natural gas use for power generation in China is projected to increase threefold by 2025. PICTURED: Wang Jin, China Huadian Engineering Co. GE 2013 ANNUAL REPORT 23

  • Page 26
    ... Increase in Shared Services 30%+ Reduction in NPI Cycle (New Product Introductions) 15% Consolidate Supply Chain 50%+ Field Approvals 80% Fewer ERPs (Enterprise Resource Planning systems) 30% Fewer P&Ls (Profit & Loss centers) 50% Reduction in Deal Cycle 45% Smaller HQ 24 GE 2013 ANNUAL...

  • Page 27
    Improved Customer Response Time Aviation: FastWorks-related overhaul projects Oil & Gas: FastWorks-related Measurement & Control projects 4x GE 2013 ANNUAL REPORT 25

  • Page 28
    ... a year, we went from a problem statement to prototypes, and we now have an alliance with Chevron to commercialize the resulting product. Known as the GE Safireâ„¢ ï¬,ow meter, it will extend the benefits of better reservoir management to the entire oil and gas industry. 26 GE 2013 ANNUAL REPORT

  • Page 29
    ... women employed at the center will initially help Saudi Aramco and GE manage their supply chains, but the facility will expand to support other clients. The ultimate goal is to recruit and train up to 3,000 women, including 1,000 to manage GE business. CUSTOMER DAY INCREASING CUSTOMER INTENSITY...

  • Page 30
    ... GE 15% MORE LEADERS OUTSIDE THE U.S. IN THE LAST FIVE YEARS GE's global leadership institute in Crotonville, New York. The Crotonville campus hosts thousands of GE employees and customers each year. Thousands more attend Crotonville leadership courses around the world. 28 GE 2013 ANNUAL REPORT

  • Page 31
    ..., global business, with innovative products to help solve health issues around the world. GE teams, like our Distributed Power team working on a new diesel engine, are using the FastWorks process to improve speed and competitiveness. The Capital Planning team ensures GE Capital is safe and secure...

  • Page 32
    ... two GE businesses without the involvement of corporate management in order to develop his or her own feel for the Company. Board members focus on the areas that are important to shareowners - strategy, risk management, leadership development, and regulatory and compliance matters. In 2013, they...

  • Page 33
    ... 10 Borrowings and Bank Deposits ...104 11 Investment Contracts, Insurance Liabilities and Insurance Annuity Benefits ...105 12 Postretirement Benefit Plans ...105 13 All Other Liabilities ...111 14 Income Taxes ...111 15 Shareowners' Equity ...114 16 Other Stock-Related Information...118 17 Other...

  • Page 34
    ...our independent directors this year, helping us sharpen our full Board meetings to better cover significant topics. Compensation policies for our executives are aligned with the long-term interests of GE investors. We strive to maintain a dynamic system of internal controls and procedures-including...

  • Page 35
    Report of Independent 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, 2013 and 2012, and the related ...

  • Page 36
    ...of consolidated three-year revenues and total segment profit, 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...

  • Page 37
    ... prices and increased productivity, reï¬,ecting improved service margins. Appliances & Lighting (formerly Home & Business Solutions) (5% and 1% of consolidated three-year revenues and total segment profit, respectively) revenues increased 5% in 2013 primarily on higher volume at Appliances. In 2012...

  • Page 38
    ... the interest rate methodology used to calculate Employee Retirement Income Security Act (ERISA) minimum pension funding requirements in the U.S. This change reduced our near-term annual cash funding requirements for the GE Pension Plan. We contributed $0.4 billion to the GE Pension Plan in 2012. We...

  • Page 39
    ...the consolidated rate, as well as other information about our income tax provisions, is provided in Note 14. The nature of business activities and associated income taxes differ for GE and for GECC and a separate analysis of each is presented in the paragraphs that follow. GE 2013 ANNUAL REPORT 37

  • Page 40
    ... tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE's tax payments are due. The GECC effective tax rate was (13.6)% in 2013, compared with 6.6% in 2012. Comparing pre-tax income to a tax benefit resulted in a negative tax rate for 2013...

  • Page 41
    ... GE's and GE Capital's policies and processes relating to the financial statements, the financial reporting process, compliance and auditing. The Audit Committee, in coordination with the GE Risk Committee, discusses with management the Company's risk assessment and risk management practices...

  • Page 42
    ..., Capital Planning Committee and Asset Quality Committee. Day-to-day risk oversight for GE Capital is provided by an independent global risk management organization that includes the GE Capital corporate function in addition to independent risk officers embedded in the individual business units. GE...

  • Page 43
    ...be found in the Financial Resources and Liquidity section. Segment Operations Our eight segments are focused on the broad markets they serve: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting and GE Capital. In addition to providing information...

  • Page 44
    ... Segments General Electric Company and consolidated affiliates (In millions) 2013 2012 2011 2010 2009 REVENUES (a) Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial segment revenues GE Capital Total segment revenues Corporate...

  • Page 45
    ... 2012 as a result of higher prices ($0.1 billion) and increased other income ($0.1 billion). Energy Management orders increased 12% to $8.8 billion in 2013. Total Energy Management backlog increased 20% to $4.6 billion at December 31, 2013, composed of equipment backlog of $3.6 billion and services...

  • Page 46
    ...) $ 44,067 $ 8,258 2013 $ 45,364 $ 7,345 2012 $ 48,324 $ 6,480 TOTAL ASSETS $ 516,829 2013 $ 539,351 2012 2011 (In millions) REVENUES Commercial Lending and Leasing (CLL) Consumer Real Estate Energy Financial Services GE Capital Aviation Services (GECAS) SEGMENT PROFIT (LOSS) $ 14,316...

  • Page 47
    ... gains on property sales ($0.1 billion). Depreciation expense on real estate equity investments totaled $0.8 billion and $0.9 billion in 2012 and 2011, respectively. Energy Financial Services 2013 revenues increased 1% and net earnings decreased 5% compared with 2012. Revenues in 2013 increased as...

  • Page 48
    ..., more opportunities for expansion of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs. Revenues are classified according to the region to which products and services are sold. For purposes of this analysis...

  • Page 49
    ... yen and dispositions at various businesses, partially offset by increases in Europe, primarily due to acquisitions. Financial results of our non-U.S. activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques to manage the effects of currency exchange...

  • Page 50
    ...security). In evaluating the overall creditworthiness of the Monoline, we use an analysis that is similar to the approach we use for corporate bonds, including an evaluation of the sufficiency of the Monoline's cash reserves and capital, ratings activity, whether the Monoline is 48 GE 2013 ANNUAL...

  • Page 51
    ...banks. A discussion of the quality of certain elements of the financing receivables portfolio follows. Our consumer portfolio is composed primarily of non-U.S. mortgage, sales finance, auto and personal loans in various European and Asian countries and U.S. consumer credit card and GE 2013 ANNUAL...

  • Page 52
    ..., corporate aircraft, and equipment used in many industries, including the construction, manufacturing, transportation, media, communications, entertainment, and healthcare industries. The portfolios in our Real Estate, GECAS and Energy Financial Services businesses are collateralized by commercial...

  • Page 53
    Financing receivables December 31 (In millions) 2013 2012 Nonearning receivables 2013 2012 Allowance for losses 2013 2012 COMMERCIAL CLL Americas Europe (a) Asia Other (a) Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE CONSUMER $ 68,585 37,962 9,469 451 116,467 3,...

  • Page 54
    ... 31 2013 2012 Allowance for losses as a percent of nonearning financing receivables 2013 2012 Allowance for losses as a percent of total financing receivables 2013 2012 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE CONSUMER...

  • Page 55
    ... by asset class and 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...

  • Page 56
    ... LOANS ALLOWANCE FOR LOSSES (SPECIFIC RESERVES) Commercial (a) Real Estate Consumer Total allowance for losses (specific reserves) Average investment during the period Interest income earned while impaired (b) $ 969 $ 12,347 626 $ 1,348 $ 16,262 750 (a) Includes CLL, Energy Financial Services...

  • Page 57
    ...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 loanto-value (LTV) ratios have typically resulted in the conclusion that the modified terms are not at current market rates of interest, even if the...

  • Page 58
    ...business lending commitments, commercial and consumer unused revolving credit lines, inventory financing arrangements and investment commitments. We manage counterparty exposure, including credit risk, on an individual counterparty basis. We place defined risk limits around each obligor and review...

  • Page 59
    ... revenues and costs. Our total contract costs and estimated earnings balance at December 31, 2013 primarily related to customers in our Power & Water, Oil & Gas, Aviation and Transportation businesses. Further information is provided in the Critical Accounting Estimates section. GE 2013 ANNUAL...

  • Page 60
    ... the past few years, has included our strategy to reduce our ending net investment in GE Capital. GECC relies on a diversified source of funding, including the unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail funding products, bank borrowings and...

  • Page 61
    ... short-term loans, without being subject to U.S. tax. Under the Internal Revenue Code, these loans are permitted to be outstanding for 30 days or less and the total of all such loans is required to be outstanding for less than 60 days during the year. At December 31, 2013, $2.2 billion of GE cash...

  • Page 62
    ...our positions. We manage counterparty credit risk (the risk that counterparties will default and not make GE provides implicit and explicit support to GECC through commitments, capital contributions and operating support. For example, and as discussed below, GE has committed to keep GECC's ratio of...

  • Page 63
    ... 2012 and 2011, respectively, reï¬,ecting the effects of lower interest rates and improved market conditions on U.S. corporate debt securities, partially offset by adjustments to reï¬,ect the effect of the unrealized gains on insurance-related assets and equity. Further information about investment...

  • Page 64
    ... services businesses use a variety of financial resources to meet our capital needs. Cash for financial services businesses is primarily provided from the issuance of term debt and commercial paper in the public and private markets and deposits, as well as financing receivables collections, sales...

  • Page 65
    ... 2011, primarily due to a reduction in total borrowings of $11.7 billion, consisting primarily of net reductions in long-term borrowings and commercial paper; $6.5 billion of dividends paid to shareowners in 2012 (including $0.1 billion paid to preferred shareowners); a reduction in bank deposits...

  • Page 66
    ... of $0.2 billion from 2012, primarily related to a decrease of $2.0 billion in PTL, partially offset by an increase of $1.9 billion in an investment in asset-backed securities issued by a senior secured loan fund. In the first quarter of 2013, PTL had repaid all outstanding debt owed and terminated...

  • Page 67
    ... aviation industry is provided in the Operations- Overview of Our Earnings from 2011 through 2013 and the Financial Resources and Liquidity-Property, plant and equipment sections and in Notes 7 and 24. Real Estate. We review the estimated value of our commercial real estate investments annually...

  • Page 68
    ...long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount...

  • Page 69
    ... 7.5% long-term expected return on those assets for cost recognition in 2014. This is a reduction from the 8.0% we assumed in 2013, 2012 and 2011. Changes in key assumptions for our principal pension plans would have the following effects. • Discount rate-A 25 basis point increase in discount rate...

  • Page 70
    ...with funding from both GE and external funds. Power & Water and Healthcare also made significant expenditures funded primarily by GE. Orders and Backlog GE infrastructure equipment orders increased 14% to $60.6 billion and services orders increased 1% to $43.8 billion at December 31, 2013. Total GE...

  • Page 71
    Selected Financial Data The following table provides key information for Consolidated, GE and GECC. (Dollars in millions; per-share amounts in dollars) 2013 2012 2011 2010 2009 GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues and other income $ 146,045 $ 146,684 Earnings from ...

  • Page 72
    Statement of Earnings General Electric Company and consolidated affiliates For the years ended December 31 (In millions; per-share amounts in dollars) 2013 2012 2011 REVENUES AND OTHER INCOME Sales of goods Sales of services Other income (Note 17) GECC earnings from continuing operations GECC ...

  • Page 73
    ...) 2013 2012 2011 GE SHAREOWNERS' EQUITY BALANCE AT JANUARY 1 Increases from net earnings attributable to the Company Dividends and other transactions with shareowners Other comprehensive income (loss) attributable to GE Net sales (purchases) of shares for treasury Changes in other capital Ending...

  • Page 74
    Statement of Financial Position General Electric Company and consolidated affiliates At December 31 (In millions, except share amounts) 2013 2012 ASSETS Cash and equivalents Investment securities (Note 3) Current receivables (Note 4) Inventories (Note 5) Financing receivables-net (Note 6) Other ...

  • 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 2013 ANNUAL REPORT...

  • Page 76
    ... increase (decrease) in bank deposits Newly issued debt (maturities longer than 90 days) Repayments and other reductions (maturities longer than 90 days) Proceeds from issuance of GECC preferred stock Repayment of preferred stock Net dispositions (purchases) of GE shares for treasury Dividends paid...

  • 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
    ... broad markets they serve: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting (formerly Home & Business Solutions) and GE Capital. Prior-period information has been reclassified to be consistent with how we managed our businesses in 2013. Unless...

  • 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
    ...part and scrap metal prices, discounted at an appropriate rate. We recognize operating lease income on a straight-line basis over the terms of underlying leases. Fees include commitment fees related to loans that we do not expect to fund and line-of-credit fees. We record these fees in earned income...

  • Page 81
    ... economic factors including interest rate and real estate market forecasts. In addition to these factors, we evaluate a Real Estate loan for impairment classification if its projected loan-to-value ratio at maturity is in excess of 100%, even if the loan is currently paying in accordance with its...

  • Page 82
    ... is included in the caption "All other assets" in the Statement of Financial Position and carried at the lower of cost or estimated fair value less costs to sell. For Consumer loans, we write off unsecured closed-end installment loans when they are 120 days contractually past due and unsecured open...

  • Page 83
    ... such risks. 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, term, whole life and...

  • Page 84
    ...the current interest rate, currency and credit environment, as well as other published data, such as rating agency market reports and current appraisals. These reviews are performed within each business by the asset and risk managers, pricing committees and valuation committees. A detailed review of...

  • Page 85
    ... use valuation methodologies using current market interest rate data adjusted for inherent credit risk, and such loans are included in Level 3. When appropriate, loans may be valued using collateral values (see Long-Lived Assets, including Real Estate below). COST AND EQUITY METHOD INVESTMENTS. Cost...

  • Page 86
    ...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 October 1, 2012 for proceeds of...

  • Page 87
    ...part in 2019, related to the sale of our GE Money Japan business. GE MONEY JAPAN Discontinued Operations Discontinued operations primarily comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit...

  • Page 88
    ... reserve and pending repurchase claims. Reserve (In millions) 2013 2012 During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with...

  • Page 89
    ... $(34) million in 2013, 2012 and 2011, respectively. OTHER FINANCIAL SERVICES In the fourth quarter of 2013, we announced the planned disposition of Consumer Russia and classified the business as discontinued operations. Consumer Russia revenues and other income (loss) from discontinued operations...

  • Page 90
    ... in 2013, 2012 and 2011, respectively. During the fourth quarter of 2013, we recorded an increase to our tax reserve related to Spanish taxes for the years prior to our 2007 disposition of our Plastics business. During the third quarter of 2012, we resolved with the Internal Revenue Service the tax...

  • Page 91
    ... issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of financial institutions. The fair value of investment securities decreased to $43,981 million at December 31, 2013, from $48,510 million at December 31, 2012, primarily due to the sale...

  • Page 92
    ... in our CMBS portfolio have investmentgrade credit ratings and are in a senior position in the capital structure of the deals. Our asset-backed securities (ABS) portfolio is collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries, as well as...

  • Page 93
    ... information about gross realized gains and losses on available-for-sale investment securities follows. (In millions) 2013 2012 2011 Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting 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
    ... 62,292 $ 231,268 $ 8,184 6,114 4,209 2,733 1,798 3,452 26,490 - $ 26,490 CLL Americas Europe (a) Asia Other (a) Total CLL Energy Financial Services GE Capital Aviation Services (GECAS) Other Total Commercial REAL ESTATE CONSUMER $ 68,585 37,962 9,469 451 116,467 3,107 9,377 318 129,269 19,899 30...

  • Page 96
    ... Provision charged to operations Other (a) Gross write-offs (b) Recoveries (b) Balance at December 31, 2012 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial REAL ESTATE CONSUMER $ 889 400 157 4 1,450 26 17 37 1,530 1,089 545 690 2,008...

  • Page 97
    ... payment performance of Commercial, Real Estate and Consumer financing receivables. 2013 December 31 Over 30 days past due Over 90 days past due (a) 2012 Over 30 days past due Over 90 days past due COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total...

  • Page 98
    ... Recorded investment in loans With a specific allowance Unpaid principal balance Associated allowance Average investment in loans December 31 (In millions) 2013 COMMERCIAL CLL Americas Europe Asia Other Total CLL Energy Financial Services GECAS Other Total Commercial (a) REAL ESTATE (b) CONSUMER...

  • Page 99
    ... rate that is at current market rates of interest given the risk characteristics of the loan or other 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...

  • Page 100
    .... Secured financing receivables within risk Category C are predominantly in our CLL businesses and are primarily composed of senior term lending facilities and factoring programs secured by various asset types including inventory, accounts receivable, cash, equipment and 98 GE 2013 ANNUAL REPORT

  • Page 101
    ... secured by auto and equipment, inventory finance and cash ï¬,ow loans. Unsecured financing receivables include private-label credit card financing. A substantial majority of these cards are not for general use and are limited to the products and services sold by the retailer. The private-label...

  • Page 102
    ... risk ratings process. We continuously adjust our credit line underwriting management and collection strategies based on customer behavior and risk profile changes. CONSUMER-OTHER Total NET CARRYING VALUE GE Land and improvements Buildings, structures and related equipment Machinery and equipment...

  • Page 103
    ... 1 Acquisitions Balance at December 31 Balance at January 1 Acquisitions Balance at December 31 Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting GE Capital Corporate Total $ 8,821 8,365 4,610 5,975 16,762 999 611 26,971 - $ 73,114 $ - 2,217...

  • Page 104
    ...market allowing for sales of real estate investments at normalized margins. Our assumed discount rate was 11.25% 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 105
    ... and aeroderivative units) and long-term product maintenance or extended warranty arrangements. These amounts are presented net of related billings in excess of revenues of $1,842 million and $1,498 million at December 31, 2013 and 2012, respectively. (c) GECC investments in real estate consisted...

  • Page 106
    Note 10. Borrowings and Bank Deposits SHORT-TERM BORROWINGS 2013 December 31 (Dollars in millions) Amount Average rate (a) 2012 Amount Average rate (a) GE Commercial paper Payable to banks Current portion of long-term borrowings Other Total GE short-term borrowings GECC $ - 346 70 1,425 1,841 ...

  • Page 107
    ... (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 2013 and 2012. (b) Substantially all unpaid claims and claims adjustment expenses and unearned premiums. December 31, 2013 Total Active employees...

  • Page 108
    ...) 2013 2012 2011 2010 Discount rate Compensation increases Expected return on assets 4.85% 4.00 7.50 3.96% 3.90 8.00 4.21% 3.75 8.00 5.28% 4.25 8.00 4.39% 3.76 6.92 3.92% 3.30 6.82 4.42% 4.31 7.09 5.11% 4.44 7.25 To determine the expected long-term rate of return on pension plan assets...

  • Page 109
    ... employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 4.5% and 4.2% of trust assets at year-end 2013 and 2012, respectively. The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income...

  • Page 110
    The following table presents GE Pension Plan investments measured at fair value. 2013 December 31 (In millions) Level 1 Level 2 Level 3 Total Level 1 2012 Level 2 Level 3 Total EQUITY SECURITIES U.S. equity securities (a) Non-U.S. equity securities (a) DEBT SECURITIES $ 11,067 7,832 $ 1,568 1,...

  • Page 111
    ...million for the principal pension plans and $7 million and $343 million for other pension plans. ESTIMATED FUTURE BENEFIT PAYMENTS (In millions) 2014 2015 2016 2017 2018 2019- 2023 Discount rate Compensation increases Expected return on assets Initial healthcare trend rate (b) 4.61% 4.00 7.00 6.00...

  • Page 112
    ... qualifying employer securities (e.g., GE common stock) and qualifying employer real property may not exceed 10% of the fair value of trust assets at the time of purchase. GE securities represented 4.0% and 5.8% of trust assets at year-end 2013 and 2012, respectively. Retiree life plan assets were...

  • Page 113
    ... FOR INCOME TAXES Postretirement Benefit Plans (In millions) 2013 2012 2011 2013 COST OF POSTRETIREMENT BENEFIT PLANS AND CHANGES IN OTHER COMPREHENSIVE INCOME Total postretirement benefit plans Principal pension plans Other pension plans Retiree benefit plans GE Current tax expense Deferred tax...

  • Page 114
    ... 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 expect our effective tax rate to increase...

  • Page 115
    ... RATE Consolidated 2013 2012 2011 2013 GE 2012 2011 2013 GECC 2012 2011 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 (a) NBCU gain Business Property...

  • Page 116
    ...31 TOTAL EQUITY GE shareowners' equity balance at December 31 Noncontrolling interests balance at December 31 Total equity balance at December 31 (a) Included $1,031 million ($806 million related to our preferred stock redemption) of dividends on preferred stock in 2011. 114 GE 2013 ANNUAL REPORT

  • Page 117
    ... 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 exercise exceeds the exercise price of $22.25. On October 16, 2013, Berkshire Hathaway exercised in full their warrants to purchase shares of GE...

  • Page 118
    ... effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized. (b) Total other comprehensive income was $11,085 million, $3,757 million and $(6,134) million in 2013, 2012 and 2011, respectively. 116 GE 2013 ANNUAL REPORT

  • Page 119
    ...preferred stock are payable semi-annually, in June and December, with the first payment on these issuances made in December 2012. GECC preferred stock is presented as noncontrolling interests in the GE Consolidated Statement of Financial Position. During 2013 and 2012, GECC paid quarterly dividends...

  • Page 120
    ... Options RSUs Total 364 - 488,133 25.32 (b) (c) (c) $ 20.02 404,574 (a) In 2007, the Board of Directors approved the 2007 Long-Term Incentive Plan, which replaced the 1990 Long-Term Incentive Plan. During 2012, an amendment was approved to increase the number of shares authorized for issuance...

  • Page 121
    ... intrinsic value (In millions) fair value term (In years) Note 17. Other Income (In millions) 2013 2012 2011 GE Purchases and sales of business interests (a) $ 1,777 Licensing and royalty income 320 Marketable securities and bank deposits 54 Associated companies (b) 40 Interest income from...

  • Page 122
    ... GE and these participants share in risks and rewards of these product programs. Under these arrangements, participation fees earned and recorded as other income totaled $44 million, $36 million and $12 million in 2013, 2012 and 2011, respectively. GE's payments to participants are recorded as cost...

  • Page 123
    Note 20. Earnings Per Share Information 2013 (In millions; per-share amounts in dollars) Diluted Basic 2012 Diluted Basic 2011 Diluted Basic AMOUNTS ATTRIBUTABLE TO THE COMPANY: CONSOLIDATED Earnings from continuing operations for per-share calculation (a) (b) Preferred stock dividends declared ...

  • Page 124
    ... (f) Total DECEMBER 31, 2012 ASSETS Investment securities Debt U.S. corporate State and municipal Residential mortgage-backed Commercial mortgage-backed Asset-backed (c) Corporate-non-U.S. Government-non-U.S. U.S. government and federal agency Retained interests Equity Available-for-sale Trading...

  • Page 125
    ... gains (losses) relating to instruments still held at December 31, 2013 (c) (In millions) Balance at January 1, 2013 Purchases Sales Settlements Transfers into Level 3 (b) Transfers Balance at out of December 31, Level 3 (b) 2013 Investment securities Debt U.S. corporate State and municipal...

  • Page 126
    ...2013 2012 Financing receivables and loans held for sale Cost and equity method investments (a) Long-lived assets, including real estate (b) Total $ (361) (484) (1,188) $ (2,033) $ (595) (153) (624) $ (1,372) (a) Includes fair value adjustments associated with private equity and real estate funds...

  • Page 127
    ... Long-lived assets, including real estate $ 2,835 72 985 Income approach, Business enterprise value Income approach Income approach (a) Discount rates are determined based on inputs that market participants would use when pricing investments, including credit and liquidity risk. An increase...

  • Page 128
    ... 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 Based on valuation methodologies using current market...

  • Page 129
    INSURANCE-CREDIT LIFE Certain insurance affiliates, primarily in Consumer, issue credit life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid. As part of our overall risk management process, we cede to third parties a portion of this associated ...

  • Page 130
    ...in our financial statements. (a) The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts included fair value adjustments related to our own and counterparty non-performance risk. At December 31, 2013 and 2012, the cumulative...

  • Page 131
    ... 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 132
    ... 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 133
    ... the assets and receiving variable fees for services provided. We are not required to consolidate these entities because the nature of our involvement with the activities of the VIEs does not give us power over decisions that significantly affect their economic performance. GE 2013 ANNUAL REPORT...

  • Page 134
    ... to any single unconsolidated VIE at December 31, 2013 is an investment in asset-backed securities issued by the Senior Secured Loan Program (SSLP), a fund that invests in high-quality senior secured debt of various middle-market companies ($6,996 million). Other significant unconsolidated VIEs...

  • Page 135
    .... The GECAS business of GE Capital had placed multiple-year orders for various Boeing, Airbus and other aircraft with list prices approximating $29,405 million and secondary orders with airlines for used aircraft of approximately $816 million at December 31, 2013. Product Warranties We provide for...

  • Page 136
    ... in 2013, 2012 and 2011, respectively. Certain supplemental information related to GE and GECC cash ï¬,ows is shown below. For the years ended December 31 (In millions) 2013 2012 2011 GE NET DISPOSITIONS (PURCHASES) OF GE SHARES FOR TREASURY Open market purchases under share repurchase program...

  • Page 137
    ... operation and maintenance services are sold into global markets. Gas, steam and aeroderivative turbines, nuclear reactors, generators, combined cycle systems, controls and related services, including total asset optimization solutions, equipment upgrades and long-term maintenance service agreements...

  • Page 138
    ...including 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...

  • Page 139
    ...to segment pre-tax income of Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting and GE Capital operating segments, respectively, for the year ended December 31, 2013. Aggregate summarized financial information for significant associated companies...

  • Page 140
    ... 2,493 $ 27,301 8,341 11,605 1,805 Total revenues Earnings from continuing operations attributable to the Company For GE, gross profit from sales is sales of goods and services less costs of goods and services sold. Earnings-per-share amounts are computed independently each quarter for earnings...

  • Page 141
    ...dividends received by GE from GECC. This includes the effects of intercompany transactions, including GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information...

  • Page 142
    ...principal pension plans, considered along with the corresponding GAAP measure, provide management and investors with additional information for comparison of our pension plan costs and operating results with the pension plan costs and operating results of other companies. 140 GE 2013 ANNUAL REPORT

  • Page 143
    ... long-term debt with equity. Despite these potential limitations, we believe that this measure, considered along with the corresponding GAAP measure, provides investors with additional information that may be more comparable to other financial institutions and businesses. GE 2013 ANNUAL REPORT...

  • Page 144
    GE Capital Ending Net Investment (ENI), Excluding Cash and Equivalents (In billions) December 31, 2013 Reconciliation of U.S. Federal Statutory Income Tax Rate to GE Effective Tax Rate, Excluding GECC Earnings 2013 2012 2011 Financial Services (GECC) total assets Adjustment: deferred income taxes ...

  • Page 145
    ... were reinvested. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2013. FIVE-YEAR FINANCIAL PERFORMANCE (In dollars) 2008 2009 2010 2011 2012 2013 209 151 124 100 GE S&P 500 DJIA 2008 2009 2010 2011 2012 2013 125...

  • Page 146
    ...lled customer orders for products and product services (12 months for product services). BORROWING Financial liability (short- or long-term) that obligates FINANCING RECEIVABLES Investment in contractual loans and leases due from customers (not investment securities). FORWARD CONTRACT Fixed price...

  • Page 147
    ...the number of times that working multiple-year terms, to provide specified services for products in our Power & Water, Oil & Gas, Aviation and Transportation installed base-for example, monitoring, maintenance, service and spare parts for a gas turbine/generator set installed in a customer's power...

  • Page 148
    ... in the United States or Europe from developments in sovereign debt situations; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation's (GECC) funding and on our ability to reduce GECC's asset levels as planned; the impact...

  • Page 149
    ... GE works every day to solve some of the world's biggest challenges. Safety and sustainability are embedded in GE's culture and define the products we make, the services we offer and the difference we make in communities around the world. www.gecitizenship.com IN 2013, • GE businesses, employees...

  • Page 150
    General Electric Company Fairfield, Connecticut 06828 www.ge.com 3.EPC055148101A.104