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A NEW KIND OF
INDUSTRIAL COMPANY
GE 2014
ANNUAL REPORT

Table of contents

  • Page 1
    A NEW KIND OF INDUSTRIAL COMPANY GE 2014 ANNUAL REPORT

  • Page 2
    ... worlds in ways no other company can. In its labs and factories and on the ground with customers, GE is inventing the next industrial era to move, power, build and cure the world. On the cover: Christie Drabic, Richard Simpson, Foday Bayon (seated in locomotive) and Dennis Peters, GE Transportation

  • Page 3
    ... + 2015 GOALS Industrial Operating EPS: $1.10-$1.20 • Double-digit EPS growth • Margin expansion Grow Industrial segments Organic revenue growth Margin expansion Disciplined/balanced capital allocation GE CFOA Buyback + dividend Dispositions GE Capital GE Capital earnings GECC dividend Key...

  • Page 4
    ... last year. We invested in enterprise capability that allows GE to win in a volatile world. We lead the merger of machines and analytics through the Industrial Internet to drive new levels of productivity. We positioned our businesses to achieve superior customer outcomes. And, we ran the Company in...

  • Page 5
    ... 100-year history in appliances, the business did not fit our core strengths, nor was our competitive position favorable. We believe that the capital can best be deployed elsewhere.1 These portfolio moves cap a decade where we repositioned GE as a more focused, high-value industrial company. During...

  • Page 6
    ..., most fuel-efficient gas turbine in the world, which can save our customers millions of dollars every year on fuel costs. Using a FastWorks approach, the GE Power & Water team launched the turbine in just under two years, bringing it to market in about half the time traditionally required. >950...

  • Page 7
    ... will save our customers $8 billion per year on fuel. It is on pace to be one of our most successful gas turbine launches in history. We deliver customer outcomes. GE is the only company positioned to deliver locomotives that meet new EPA standards in 2015. This machine is a modern miracle. The Tier...

  • Page 8
    ... customers and capitalize on growth themes. Enterprise Strength: The GE Store We drive enterprise advantages that benefit the entire company, through what we call the "GE Store." It means that every business in GE can share and access the same technology, markets, structure and intellect. The value...

  • Page 9
    ... Tier 3 locomotive Working with BP and Maersk Drilling on their joint Project 20K™ Rigs design program 20K BLOWOUT PREVENTER • The oil and gas industry's first 20,000-psi rated deepwater drilling system • Reliable and durable in ultra-deepwater, at temperatures up to 350°F GE 2014 ANNUAL...

  • Page 10
    ... OVERHAUL 3-D PRINTED FUEL NOZZLES 19 MORE THAN $100B IN ORDERS (AT LIST PRICE) PARTS MADE FROM CERAMIC-MATRIX COMPOSITES, WITH CAN SAVE AIRLINES $1.2M A YEAR IN FUEL COSTS PER PLANE 20% HIGHER TEMPERATURE CAPABILITY THAN METAL LEAP1 ENGINE The LEAP will power the next generation of narrow...

  • Page 11
    ... Sigma...democratized; broad competitive intensity; mistakes & pivots a part of good management Seamless market alignment globally; more horizontal solutions for customers...only value winning Smartest & most efficient company in the world...new talent base bringing new skill set GE 2014 ANNUAL...

  • Page 12
    ...a "GE job." We train customer executives, invest in schools, develop small business and bring higher standards. This unique cultural edge allows us to beat global competitors far from home. We will leverage all of the GE Store as we embrace the Alstom acquisition. Alstom is a big bet for the Company...

  • Page 13
    ... where a light bulb used to be. In cities around the world, GE is working to transform street lighting into the analytical brain of urban life. Today, Lighting is becoming a high-tech infrastructure business. It is a gateway for most energy management solutions. GE will create investor value through...

  • Page 14
    ...50+ 100+ Executives in growth markets Services employees in Global Growth Organization Commercial employees in Global Growth Organization Service shops outside of the U.S. Global factories Countries with $1B+ orders 22 GLOBAL OPERATIONS CENTERS Shared services locations allow GE to do business ef...

  • Page 15
    ... our customers value the access to GE industrial capability. But, we must stay focused on improving returns at GE Capital. GE Capital earned $7 billion in 2014, down about 12%. It returned a $3 billion dividend to the parent, a substantial decline from 2013. GE Capital is financially secure, and...

  • Page 16
    ...is a statement of fact. Great teams win in the market. 2. Stay lean to go fast. Scarcity drives teamwork, will and accountability. 3. Learn and adapt to win. Good companies make mistakes quickly, WE WILL RETURN $50B TO INVESTORS IN 2014-16 THROUGH DIVIDENDS AND SHARE REPURCHASES. 14 GE 2014 ANNUAL...

  • Page 17
    ... like MARGINS + RETURNS Industrial Segment Operating Margin 15.7% 16.2% + ~17.0% 2013 2014 2015E 2016F Industrial Return on Total Capital (ROTC) 14.3% 14.0% + ~17.0% 2013 2014 2015E 2016F GE + ALSTOM ENHANCING THE GE PORTFOLIO WITH COMPLEMENTARY TECHNOLOGY, GLOBAL CAPABILITY, A LARGE INSTALLED...

  • Page 18
    ... + SYSTEM COST SAFETY & QUALITY 1% Reduction in System Inefficiencies = Rail Savings $27B Healthcare Savings $63B 1% Reduction in Capital Expenditures = Oil & Gas Savings $90B GE SOFTWARE PREDIX TM TEAM The GE Software team has developed Predixâ„¢, the operating system for the Industrial Internet...

  • Page 19
    ... more informal and more open. I like our team, our customers and our investors. I learn a lot from them. I continue to push myself and the team. Inside GE, there is no task beneath me, even today. I am committed to deliver results in an uncertain world. Today, GE is a different company-a company in...

  • Page 20
    ... Cognizant Technology Solutions Corporation, global information technology, consulting and business process outsourcing, Teaneck, New Jersey. > Director since 2013. Jeffrey R. Immelt (not pictured; pictured on page 1) Chairman of the Board and Chief Executive Officer, General Electric Company, Fair...

  • Page 21
    ... ended December 31, 2014 or Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____to _____ Commission file number 001-00035 General Electric Company (Exact name of registrant as specified in charter) New York (State or other...

  • Page 22
    2 GE 2014 FORM 10-K

  • Page 23
    ... General Electric Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Key Performance Indicators Consolidated Results Segment Operations GE Corporate Items and Eliminations Discontinued Operations Other Consolidated Information Statement of Financial Position...

  • Page 24
    ... change over time to reï¬,ect changes in the environment in which General Electric competes. Throughout the Annual Report on Form 10-K, we use the following icons: Power & Water Oil & Gas Energy Mgmt. Aviation Healthcare Transportation Appliances & Lighting GE Capital 4 GE 2014 FORM 10-K

  • Page 25
    ... 2014 Operating Goals Target Actual Year-over-Year Change 2% 7% 1% 10% 12% 6% 50bps3 190bps3 22% - REVENUES Industrial segment organic revenues1 OPERATING EARNINGS1 Industrial segment profit GE Capital earnings GE CFOA OPERATING MARGINS INDUSTRIAL SG&A EXPENSES AS % OF SALES TOTAL CORPORATE COSTS...

  • Page 26
    ... Industrial SG&A as a percentage of sales 190 basis points from 2013 - Reduced corporate costs ~$1B3 • Intensified focus on gross margins • Drove culture of simplification & accountability - Released GE Beliefs - Changed executive cash bonus program to align it more closely with key investor...

  • Page 27
    ... double-digit growth Industrial businesses generated ~$17B of cash ï¬,ow Stronger, more diversified Energy1 Smaller GE Capital that is stronger & more focused1 2009 Supported GE Capital with cash infusions Revenues Profits 2015 Oil price drop Aviation, Healthcare Restructuring Oil & Gas...

  • Page 28
    ... power Major products: electrical distribution & control products & services, lighting & power panels, grid management products & grid modernization services, industrial automation & software solutions, advanced motor, drive & control technologies MISSION: Providing our aviation customers with the...

  • Page 29
    ...: locomotives, diesel engines, drilling motors, mining equipment & propulsion systems, motorized drive systems, signaling systems, software & analytics solutions to optimize rail transportation MISSION: Answering real-life needs, defining trends & simplifying routines. Leading a global lighting...

  • Page 30
    ..., Healthcare Financial Services MISSION: Investing financial, human & intellectual capital to help our customers build their businesses Major products: GE-industry-focused financial services verticals, commercial loans & leases, commercial real estate, ï¬,eet management services, consumer credit...

  • Page 31
    The GE Store Driving Competitive Advantage Across Our Businesses POWER & WATER Provides combustion science & services installed base AVIATION Provides advanced materials & manufacturing techniques, & engineering productivity APPLIANCES & LIGHTING LED is gateway to energy efficiency GLOBAL ...

  • Page 32
    ...hardware/domain expertise with software/analytics capabilities to drive services growth Current key initiatives: service contract optimization, productivity, global asset strategy, field engineer tools, controls system convergence System Cost Reduction + Safety & Quality + 12 GE 2014 FORM 10-K

  • Page 33
    ... SVP, Human Resources Industrial SG&A expenses as a percentage of sales 2012 2013 2014 17.5% 15.9% 14.0% $1B invested in employee development each year OUR GLOBAL LEADERSHIP INSTITUTE Crotonville is at the forefront of thinking in leadership, culture, strategy & innovation. Some of GE's best-known...

  • Page 34
    ... announced1 75% INDUSTRIAL 2016 OPERATING EPS GOAL 25% FINANCIAL SERVICES GE only in businesses that connect to our core competencies STRONGER & SMALLER GE CAPITAL Ending net investment (ex. liquidity)2 Long-term debt outstanding Commercial paper Cash & liquidity Tier 1 common ratio - Basel...

  • Page 35
    ... 75% Industrial 25% GE Capital Buyback (reported on a book basis) Plant & Equipment Offset employee share program dilution & reduce share count (including through Synchrony Financial split-off 2) to $1.9B $10.4B $5.2B Focus on low-cost multimodal facilities in key growth markets $3.9B $3.7B...

  • Page 36
    ... on commercial paper levels to cash & bank lines of credit • Cash ï¬,ow metrics in compensation plans • Credit rating agencies • Federal Reserve, OCC, FDIC SEE NEXT PAGE Global compliance • 750+ compliance professionals • ~500 ombuds • Policy Compliance Review Board...3 meetings...

  • Page 37
    ... DEVELOPMENT & COMPENSATION COMMITTEE SCIENCE & TECHNOLOGY COMMITTEE RISK COMMITTEE BOARD OVERSIGHT GECC BOARD CORPORATE AUDIT STAFF & GECC AUDIT POLICY COMPLIANCE REVIEW BOARD GE BLUEPRINT REVIEWS GE CAPITAL ENTERPRISE RISK MANAGEMENT COMMITTEE MANAGEMENT OVERSIGHT STRATEGIC RISK GLOBAL...

  • Page 38
    ... GE as we continue to balance the interests of our shareowners, employees and retirees." Jeff Immelt, Chairman of the Board & Chief Executive Officer PENSION & HEALTHCARE PLANS PRE-TAX EXPENSE 1 $6.4B $4.4B $3.2B Cost increase drivers • Declining interest rates • Volatile financial markets...

  • Page 39
    ... and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, oil and gas production equipment, and household appliances to medical imaging, business and consumer financing and industrial products, we serve customers in approximately...

  • Page 40
    ...C OUR INDUSTRIAL OPERATING SEGMENTS Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting OUR FINANCIAL SERVICES OPERATING SEGMENT GE Capital Business, operation and financial overviews for our operating segments are provided in the "Segment Operations...

  • Page 41
    ... industries in which we participate. The businesses in which General Electric Capital Corporation (GECC) engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, consumer...

  • Page 42
    ... information should not be considered part of this report. General Electric Capital Corporation filed a Form 10-K Report with the SEC, and this can also be viewed at www.ge.com/investor-relations/investor-services/personal-investing/sec-filing. GE's Investor Relations website at www.ge.com/investor...

  • Page 43
    ...Company) combine the industrial manufacturing and services businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Corporation (GECC or financial services). Unless otherwise indicated by the context, we use the terms "GE" and "GECC" on the basis...

  • Page 44
    ...) REVENUES PERFORMANCE 2013 Industrial Segment Industrial Segment Organic* Financial Services (3)% (3)% 1% Flat 2014 6% 7% EARNINGS PER SHARE „ „ Earnings „ „ Operating Earnings* INDUSTRIAL SEGMENT PROFIT INDUSTRIAL SEGMENT MARGIN INDUSTRIAL ORDERS INDUSTRIAL BACKLOG Equipment Equipment...

  • Page 45
    ...GE CFOA SHAREHOLDER INFORMATION RETURNED $10.8 BILLION TO SHAREOWNERS IN 2014 GECC Dividend Industrial CFOA* Dividends $8.9 billion Stock buyback $1.9 billion ANNUAL MEETING General Electric's 2015 Annual Meeting of Shareowners will be held on April 22, 2015, in Oklahoma City, Oklahoma. 2013 GE...

  • Page 46
    .... The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2014. STOCK PRICE RANGE AND DIVIDENDS With respect to "Market Information," in the United States, General Electric common stock is listed on the New York Stock Exchange...

  • Page 47
    ... REVENUES 2014 SEGMENT REVENUES SIGNIFICANT DEVELOPMENTS IN 2014 We completed the initial public offering of our North American Retail Finance business, Synchrony Financial, resulting in proceeds of $2.8 billion and target to complete the exit through a split-off transaction. We sold GE Money Bank...

  • Page 48
    ...INDUSTRIAL SEGMENT EQUIPMENT & SERVICES REVENUES Equipment Services COMMENTARY: 2014 - 2013 Consolidated revenues increased $2.5 billion, or 2%. x Industrial segment revenues increased 6%, reflecting organic growth* of 7% and the effects of acquisitions (primarily Lufkin Industries, Inc. (Lufkin...

  • Page 49
    ...a percentage of total sales decreased to 14.0% as a result of global cost reduction initiatives, primarily at Power & Water and Healthcare. This was partially offset by higher acquisition-related costs. 2013 - 2012 Consolidated earnings increased 4% on strong industrial segment growth and continued...

  • Page 50
    ... the industrial segment s. Interest and other financial charges and income taxes are included in determining segment profit (which we sometimes refer to as "net earnings") for the GE Capital segment. Certain corporate costs, such as shared services, employee benefits and information technology are...

  • Page 51
    ... revenues Segment profit Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial segment profit GE Capital Total segment profit Corporate items and eliminations GE interest and other financial charges GE provision for income taxes...

  • Page 52
    ... CEO, GE Power & Water x Over 20 years of service with General Electric Headquarters & Operations x x x x x x 18% of segment revenues in 2014 25% of industrial segment revenues 30% of industrial segment profit Headquarters: Schenectady, NY Serving customers in125+ countries Employees: approximately...

  • Page 53
    ... 2014 SUB-SEGMENT REVENUES  BACKLOG Equipment Services EQUIPMENT/SERVICES REVENUES  UNIT SALES Services Equipment SIGNIFICANT TRENDS & DEVELOPMENTS x The Alstom transaction is expected to advance our strategic priorities and industrial growth. Alstom's Thermal and Renewables businesses...

  • Page 54
    ... by higher prices and higher other income related to a sale of assets. The decrease in profit was mainly due to lower volume, primarily equipment sales at PGP and Renewables, and lower productivity despite decreases in SG&A cost. These decreases were partially offset by positive business mix, the...

  • Page 55
    ... GE Oil & Gas x 20 years of service with General Electric Headquarters & Operations x x x x x x 12% of segment revenues in 2014 17% of industrial segment revenues 15% of industrial segment profit HQ: London, UK Serving customers in 150+ countries Employees: approximately 44,000 Products & Services...

  • Page 56
    ... the acquisition of Lufkin, a leading provider of artificial lift technologies for the oil and gas industry and a manufacturer of gears, for $3.3 billion. Revenues for Lufkin are included in the D&S sub-segment. Relatively lower oil prices leading to reductions in customers' forecasted capital...

  • Page 57
    ...0.2 (0.1) 2.2 2013 - 2012 Segment revenues up $1.7 billion (11%); Segment profit up $0.3 billion (13%) as a result of: x The increase in revenues was primarily due to higher volume, mainly driven by increased equipment sales as well as the impact of acquisitions ($0.7 billion), higher prices at TMS...

  • Page 58
    ... & CEO, GE Energy Management x Over 30 years of service with General Electric Headquarters & Operations x x x x x x 5% of segment revenues in 2014 7% of industrial segment revenues 1% of industrial segment profit Headquarters: Atlanta, GA Serving customers in 150+ countries Employees: approximately...

  • Page 59
    ... wind & solar industries, which is driving demand in our Power Conversion business for equipment and services. While we see signs of growth in the North American electrical distribution market, the European economic recovery is slow, and demand remains soft in other parts of the developed world. The...

  • Page 60
    ... „ Revenue „ „ Profit COMMENTARY: 2014 - 2013 Segment revenues down $0.3 billion (3%) as a result of: x Lower volume ($0.2 billion) from weakness in North American utility and electrical distribution markets, partially offset by higher sales in Power Conversion. 2013 - 2012 Segment revenues up...

  • Page 61
    ... & CEO, GE Aviation x Over 30 years of service with General Electric Headquarters & Operations x x x x x x 16% of segment revenues in 2014 22% of industrial segment revenues 28% of industrial segment profit Headquarters: Cincinnati, OH Serving customers in 125+ countries Employees: approximately 44...

  • Page 62
    .../SERVICES REVENUES UNIT SALES Services Equipment (a) GEnx engines are a subset of commercial engines (b) Commercial spares shipment rate in millions of dollars per day SIGNIFICANT TRENDS & DEVELOPMENTS x x x x x On August 1, 2013, we completed the acquisition of the aviation business...

  • Page 63
    ...x The increase in revenues was due to higher volume and higher prices driven by Commercial Engines volume, spare parts volume and the third-quarter 2013 acquisition of Avio. The increase in profit was mainly due to higher prices in our Commercial Engines and Commercial Services businesses and higher...

  • Page 64
    ..., GE Healthcare x Over 25 years of service with General Electric Headquarters & Operations x x x x x x 12% of segment revenues in 2014 17% of industrial segment revenues 17% of industrial segment profit Headquarters: Little Chalfont, UK Serving customers in 140+ countries Employees: approximately...

  • Page 65
    ... of the Affordable Care Act. Emerging markets are expected to grow long-term with short-term volatility. API Healthcare (API), a healthcare workforce management software and analytics solutions provider, was acquired in February 2014 for $0.3 billion. Life Sciences is expanding its business through...

  • Page 66
    ... 3.0 COMMENTARY: 2014 - 2013 Segment revenues up $0.1 billion (1%); Segment profit flat as a result of: x The increase in revenues was due to higher volume, driven by the higher sales in Life Sciences. This increase was partially offset by lower prices mainly at Healthcare Systems and the effects...

  • Page 67
    ... & CEO, GE Transportation x Over 15 years of service with General Electric Headquarters & Operations x x x x x x 4% of segment revenues in 2014 5% of industrial segment revenues 6% of industrial segment profit Headquarters: Chicago, IL Serving customers in 60+ countries Employees: approximately 13...

  • Page 68
    ... ORDERS Equipment Services 2014 SUB-SEGMENT REVENUES BACKLOG Equipment Services EQUIPMENT/SERVICES REVENUES UNIT SALES  Services Equipment SIGNIFICANT TRENDS & DEVELOPMENTS x x Rail volume, especially in North America, continues to climb and the number of parked locomotives remains...

  • Page 69
    ... Revenue „ „ Profit COMMENTARY: 2014 - 2013 Segment revenues down $0.2 billion (4%) as a result of: x Lower volume ($0.2 billion), primarily in Mining reflecting weakness in the industry, partially offset by an increase in volume in the locomotive services business. 2013 - 2012 Segment revenues...

  • Page 70
    ... years of service with General Electric Headquarters & Operations x x x x x x x 5% of segment revenues in 2014 7% of industrial segment revenues 2% of industrial segment profit Appliances HQ: Louisville, KY Lighting HQ: East Cleveland, OH Serving customers in 100+ countries Employees: approximately...

  • Page 71
    ... for sale in the third quarter of 2014. 2013 - 2012 Segment revenues up $0.4 billion (5%) as a result of: x Higher volume ($0.4 billion) driven by higher sales at Appliances. Segment profit up $0.1 billion (23%) as a result of: x Improved productivity ($0.1 billion) and higher prices. GE 2014 FORM...

  • Page 72
    ... and products worldwide for businesses of all sizes. Services include commercial loans and leases, fleet management, financial programs, credit cards, personal loans and other financial services. GE Capital also develops strategic partnerships and joint ventures that utilize GE's industry-specific...

  • Page 73
    ... GE CAPITAL OPERATIONAL OVERVIEW (Dollars in billions) 2014 GEOGRAPHIC REVENUES: $42.7 BILLION NET INTEREST MARGIN 2014 SUB-SEGMENT REVENUES TIER 1 COMMON RATIO ESTIMATE* ENDING NET INVESTMENT, EXCLUDING LIQUIDITY* DIVIDENDS RETURNED TO PARENT IN 2014 Quarterly Dividends $2.0 billion Special...

  • Page 74
    ...on the global commercial paper markets and an increase in alternative sources of funding such as deposits); and reduce capital requirements while strengthening capital ratios. Additional information about our liquidity and how we manage this risk can be found in the Financial Resources and Liquidity...

  • Page 75
    ..., including the 2013 sale of real estate comprising certain floors located at 30 Rockefeller Center, New York. Business Property - During 2012, we completed the sale of a portion of our Real Estate Business Properties portfolio (Business Property), including certain commercial loans, the origination...

  • Page 76
    ... ($0.1 billion). Real Estate 2014 revenues decreased by $0.9 billion, or 24%, as a result of decreases in net gains on property sales ($0.6 billion) mainly due to the 2013 sale of real estate comprising certain floors located at 30 Rockefeller Center, New York, organic revenue declines ($0.2 billion...

  • Page 77
    ... lease portfolio of commercial aircraft, and core decreases, partially offset by higher gains. x x x For additional information related to GE Capital segment operations, refer to the General Electric Capital Corporation annual report on Form 10-K for the year ended December 31, 2014. GE 2014 FORM...

  • Page 78
    ... retirement plans, restructuring and other costs reported in corporate, and the unallocated portion of certain corporate costs (such as research and development spending and costs related to our Global Growth & Operations organization). REVENUES AND OPERATING PROFIT (COST) (In millions) Revenues...

  • Page 79
    ... retirement plans resulting from our agreement with Electrolux to sell the Appliances business, and $0.5 billion of lower eliminations and other, which was driven by $0.4 billion of lower corporate costs, which include research and development and functional spending in 2014. In 2013, eliminations...

  • Page 80
    ...for which responsibility preceded the current management team. The amount of costs and gains not included in segment results follows. COSTS (In billions) Power & Water Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total $ 2014 0.6 0.3 0.2 0.3 0.5 0.1 2.1 $ 2013...

  • Page 81
    ... tax benefit related to the resolution with the Internal Revenue Service regarding the tax treatment of the 2007 sale of our Plastics business. For additional information related to discontinued operations, see Note 2 to the consolidated financial statements in this Form 10-K Report. GE 2014...

  • Page 82
    ... to the actuarial models that measure benefit obligations and their related effects on operations: x x Our discount rate for our principal pension plans at December 31, 2014 was 4.02%, which reflected current interest rates. The Society of Actuaries recently issued new mortality tables projecting...

  • Page 83
    ... 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 did not contribute to the GE Pension Plan in either 2014 or 2013. On an ERISA basis...

  • Page 84
    ... TAX RATE (ETR) PROVISION FOR INCOME TAXES CASH INCOME TAXES PAID 2014 - 2013 COMMENTARY x The increase in the consolidated provision for income taxes was attributable in part to decreased benefits from lowertaxed global operations including the absence of the 2013 benefits related to the sale...

  • Page 85
    ... of benefits related to the sale of a portion of Cembra, the realization of benefits for prior-year losses, and the resolution of IRS audits. OTHER INFORMATION To the extent global interest rates and non-U.S. operating income increase, we would expect tax benefits to increase, subject to management...

  • Page 86
    ...Form 10-K Report. AUDIT RESOLUTIONS - EFFECT ON GE TAX RATE, EXCLUDING GECC EARNINGS 2014 Tax on global activities including exports U.S. business credits All other - net Total (0.2)% (0.7) (0.9)% 2013 (2.4)% (0.6) (1.0) (4.0)% 2012 (0.7)% (0.9) (1.6)% *Non-GAAP Financial Measure 66 GE 2014 FORM 10...

  • Page 87
    ... RATE (Dollars in billions) GECC ETR 2012 2013 2014 GECC PROVISION (BENEFIT) FOR INCOME TAXES 2012 2013 2014 2014 - 2013 COMMENTARY x x The increase in GECC provision for income taxes of $1.1 billion was primarily attributable to the absence of the significant tax benefit related to the 2013 sale...

  • Page 88
    ... of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs. 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...

  • Page 89
    ... in 2012, primarily driven by the euro ($1.4 billion) and Brazilian real ($0.2 billion). The effects of foreign currency fluctuations on earnings were minimal, with no single currency having a significant impact. GECC NON-U.S. REVENUES The decreases in GECC non-U.S. revenues in 2014 and 2013 were...

  • Page 90
    ... unsecured debt issuance $0.6 billion from business dispositions $(8.9) billion dividends to shareowners $(2.2) billion used to buyback treasury stock under our share repurchase program $(2.1) billion used to acquire businesses For additional information on GE Cash, see the Statement of Cash Flows...

  • Page 91
    ... real estate, commercial aircraft and operating assets in the global energy and water industries, respectively. We are in a secured position for substantially all of our commercial portfolio. Our consumer portfolio is composed primarily of non-U.S. mortgage, sales finance, auto and personal loans...

  • Page 92
    ... for losses and the overall financing receivables balance as discussed above. For additional information related to the portfolio of financing receivables, refer to the General Electric Capital Corporation annual report on Form 10-K for the year ended December 31, 2014. 72 GE 2014 FORM 10-K

  • Page 93
    ...the past few years, has incorporated 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 94
    ...$0.8 billion unsecured term loans maturing in 2019 under the New Bank Term Loan Facility with third party lenders. Subsequent to December 31, 2014 through February 13, 2015, Synchrony Financial issued an additional $1.0 billion of senior unsecured debt maturing in 2020. COMMERCIAL PAPER (In billions...

  • Page 95
    ... Bank (formerly GE Capital Retail Bank), a Federal Savings Bank (FSB), and GE Capital Bank, an industrial bank (IB). The FSB and IB currently issue certificates of deposit (CDs) in maturity terms up to 10 years. ALTERNATIVE FUNDING (In billions) Total alternative funding at December 31, 2013 Total...

  • Page 96
    ...AND DERIVATIVE INSTRUMENTS, GUARANTEES AND COVENANTS CREDIT RATINGS As of December 31, 2014, GE's and GECC's long-term unsecured debt ratings from Standard and Poor's Ratings Service (S&P) were AA+ with a stable outlook and their short-term funding ratings from S&P were A-1+. We are disclosing these...

  • Page 97
    ... keep GECC's ratio of earnings to fixed charges above a minimum level. GECC's credit rating is higher than it would be on a stand-alone basis as a result of this financial support. GECC currently does not pay GE for this support. Under an agreement between GE and GECC, GE will make payments to GECC...

  • Page 98
    ... industrial businesses also have liquidity available via the public capital markets. Our financial 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...

  • Page 99
    ... NBCU LLC deal-related tax payments, and payouts under our long-term incentive plan. Further, GECC paid dividends totaling $3.0 billion and $6.0 billion to GE, including special dividends of $1.0 billion and $4.1 billion in 2014 and 2013, respectively. x GE cash used for investing activities...

  • Page 100
    ...purchases of $1.1 billion in 2014, compared with net sales of $1.7 billion in 2013. GECC cash used for financing activities decreased $15.8 billion primarily due to the following: x A net increase in deposits at our banks of $11.1 billion. x x Lower dividends paid to GE driven by dividends totaling...

  • Page 101
    ... arms-length basis, are eliminated and consist primarily of GECC dividends to GE; 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 technology (IT) and...

  • Page 102
    ... and certain property and casualty contracts, and excluded long-term care, variable annuity and other life insurance contracts. (d) Included an estimate of future expected funding requirements related to our postretirement benefit plans and included liabilities for unrecognized tax benefits. Because...

  • Page 103
    ...values of these assets could be subject to decline or impairment in the current environment. (h) Excluded $33.7 billion of cash and equivalents, which is composed of $25.3 billion of cash on short-term placement with highly rated global financial institutions based in Europe, sovereign central banks...

  • Page 104
    ...expect that other parts will be largely unaffected. In response to this uncertain industry outlook, we have implemented cost actions and increased our focus on productivity. We expect that low oil prices will benefit our other businesses through lower direct material and other variable costs as well...

  • Page 105
    ... and policies for reviewing major risk exposures and concentrations, and evaluates relevant data either for individual loans or financing leases, or on a portfolio basis, as appropriate. Further information is provided in the Global Risk Management section and Statement of Financial Position...

  • Page 106
    ... business plans. To determine fair value, we use quoted market prices when available, our internal cash flow estimates discounted at an appropriate interest rate and independent appraisals, as appropriate. Our operating lease portfolio of commercial aircraft is a significant concentration of assets...

  • Page 107
    ..., available 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...

  • Page 108
    ... assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. For our insurance activities remaining in continuing operations, we periodically test for impairment our deferred acquisition costs and present value of future profits. Further information...

  • Page 109
    ... values and subsequent-year pension expense. Our discount rates for principal pension plans at December 31, 2014, 2013 and 2012 were 4.02%, 4.85% and 3.96%, respectively, reflecting market interest rates. To determine the expected long-term rate of return on pension plan assets, we consider current...

  • Page 110
    ... Information - Income Taxes section within the MD&A and in Note 14 to the consolidated financial statements in this Form 10-K Report. DERIVATIVES AND HEDGING We use derivatives to manage a variety of risks, including risks related to interest rates, foreign exchange and commodity prices. Accounting...

  • Page 111
    ... debt and equity securities and derivatives. Assets that are not measured at fair value every reporting period but that are subject to fair value measurements in certain circumstances include loans and long-lived assets that have been reduced to fair value when they are held for sale, impaired loans...

  • Page 112
    ... Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace...

  • Page 113
    ... not been adversely affected by the inability to obtain raw materials. Sales of goods and services to agencies of the U.S. Government as a percentage of revenues follow. 2014 Total sales to U.S. Government agencies Aviation segment defense-related sales 3% 2 2013 3% 2 2012 3% 3 GE 2014 FORM 10-K 93

  • Page 114
    ... EPS and operating EPS excluding the effects of the 2011 preferred stock redemption, and Industrial operating earnings Industrial segment organic revenue growth Industrial cash flows from operating activities (Industrial CFOA) and GE CFOA excluding the effects of NBCU deal-related taxes Free cash...

  • Page 115
    ...investors with useful information about the relative size of our industrial and financial services businesses in relation to the total company. We also believe that operating EPS excluding the effects of the $0.8 billion preferred dividend related to the redemption of our preferred stock (calculated...

  • Page 116
    ... Energy Management Aviation Healthcare Transportation Appliances & Lighting Industrial segment revenues Less the effects of: Acquisitions, business dispositions (other than dispositions of businesses acquired for investment) and currency exchange rates Industrial segment revenues excluding effects...

  • Page 117
    ... of dividends paid by our financial services business and the separate presentation in our financial statements of the Financial Services (GECC) cash flows. We believe that our measures of Industrial CFOA and CFOA excluding NBCU dealrelated taxes provide management and investors with useful measures...

  • Page 118
    ... of discontinued operations(b) (a) On an annual basis, calculated using a five-point average. (b) Used for computing return on average GE shareowners' equity and return on average total capital invested (ROTC). 2014 $ 131,914 (167) $ 132,081 2013 $ 124,501 (167) $ 124,668 2012 $ 120,411 (478) $ 120...

  • Page 119
    ... capital Industrial ROTC (a) GE interest at a 35% tax rate. (b) On an annual basis, calculated using a five-point average. (c) Includes average noncontrolling interests, calculated using a five-point average partially offset by the estimated value of assets held by GE to support GECC. $ 2014...

  • Page 120
    ...December 31, 2014. We have provided the GECC ratio of debt to equity on a basis that reflects the use of liquidity as a reduction of debt. For purposes of this ratio, we have also adjusted cash and debt balances to include amounts classified as assets and liabilities of businesses held for sale and...

  • Page 121
    ... U.S. business credits All other - net GE effective tax rate, excluding GECC earnings 35.0 % (13.9) (1.1) (3.0) (18.0) 17.0 % 2013 35.0 % (7.9) (2.8) (5.4) (16.1) 18.9 % 2012 35.0 % (7.6) (1.2) (4.9) (13.7) 21.3 % We believe that the GE effective tax rate is best analyzed in relation to GE earnings...

  • Page 122
    ... is widely used by analysts and regulators to assess the capital position of financial services companies. GECC's Tier 1 common ratio estimate is not a Basel I defined regulatory capital ratio and may not be comparable to similarly titled measures reported by other companies. 102 GE 2014 FORM 10-K

  • Page 123
    ... range Year-end closing stock price Cash and equivalents Total assets of continuing operations Total assets Long-term borrowings Common shares outstanding - average (in thousands) Common shareowner accounts - average Employees at year end(c) United States Other countries Total employees(c) GE data...

  • Page 124
    ... common stock through 2015 and we had repurchased a total of approximately $24.6 billion under the Program. The Program is flexible and shares are acquired with a combination of borrowings and free cash flow from the public markets and other sources, including GE Stock Direct, a stock purchase plan...

  • Page 125
    ... adequacy that apply to large bank holding companies, market terms requirements for intercompany transactions and enhanced risk management and governance requirements. The proposed standards would also apply stress testing and capital planning requirements to GECC under the FRB's comprehensive...

  • Page 126
    ...1934. GE Money Bank, Czech Republic (GEMB CZ) is a full-service retail bank in the Czech Republic and a subsidiary of General Electric Capital Corporation. GEMB CZ maintains a $7.5 million line of credit and three cash accounts for DF DeutscheForfait s.r.o., a Czech company (DF Sub), which purchases...

  • Page 127
    RISK MANAGEMENT RISK MANAGEMENT GE 2014 FORM 10-K 107

  • Page 128
    ... between risk management policies and practices, corporate strategy and senior executive compensation. The Management Development and Compensation Committee also incentivizes leaders to improve the Company's competitive position. THE SCIENCE & TECHNOLOGY COMMITTEE oversees the direction and...

  • Page 129
    ...; health, safety and environmental compliance; financial reporting and controllership; and information technology and security. A vice-chairman of GE and GE's CRO are responsible for overseeing and coordinating risk assessment and mitigation on an enterprise-wide basis. They lead the Corporate Risk...

  • Page 130
    ... are defined as GE Capital's Enterprise Risk Universe, which includes the following risks: strategic, liquidity, credit and investment, market, compliance and operational (including financial, information technology, human resources and legal). Reputational risk is considered and managed across each...

  • Page 131
    ...senior risk officers, current portfolio levels, strategic planning, and regulatory and rating agency expectations. The Enterprise Risk Appetite Statement is presented to the GECC Board and the GE Risk Committee for review and approval at least annually. On a quarterly basis, the status of GE Capital...

  • Page 132
    ... risk relates to the Company's future business plans and strategies, including the risks associated with: the global macro-environment in which we operate; mergers and acquisitions and restructuring activity; intellectual property; and other risks, including the demand for our products and services...

  • Page 133
    ... terms. OPERATIONAL RISKS Operational risk relates to risks arising from systems, processes, people and external events that affect the operation of our businesses. It includes product life cycle and execution; product safety and performance; information management and data protection and security...

  • Page 134
    ...computer crime could pose a risk to our systems, networks, products, solutions, services and data. Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks pose a risk to the security of GE's and its customers', partners', suppliers' and third...

  • Page 135
    ... affect GE's or GE Capital's business, financial position and results of operations. Credit ratings - Failure to maintain our credit ratings could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets. The major debt rating agencies...

  • Page 136
    ... about financial market and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions we use to estimate pension expense for 2015 are the discount rate and the expected long-term rate of return on the plan assets. In addition...

  • Page 137
    ... bank holding companies, market terms requirements for intercompany transactions and enhanced risk management and governance requirements. In addition, while GECC's capital adequacy as a savings and loan holding company, including planned capital distributions such as dividend payments, is currently...

  • Page 138
    ... in the United States District Court for the Southern District of New York. One case, in which the plaintiff is BNY, was filed in the third quarter 2012. In the second quarter 2013, BNY filed an amended complaint in which it asserts claims on approximately $900 million of mortgage loans, and seeks...

  • Page 139
    ...with notice in the fourth quarter 2012. In the second quarter 2013, Deutsche Bank, in its role as securitization trustee of the trust at issue in the case, intervened as a plaintiff and filed a complaint relating to approximately $1,300 million of loans and alleging losses in excess of approximately...

  • Page 140
    ...life of contract sales for product services). Borrowing Financial liability (short or long-term) that obligates us to repay cash or another financial asset to another entity. Borrowings as a percentage of total capital invested For GE, the sum of borrowings and mandatorily redeemable preferred stock...

  • Page 141
    ... paid for acquisition of a business. Calculated as the purchase price less the fair value of net assets acquired (net assets are identified tangible and intangible assets, less liabilities assumed). Guaranteed investment contracts (GICs) Deposit-type products that guarantee a minimum rate of return...

  • Page 142
    ... relate to an exposure to variability in the cash flows of recognized assets, liabilities or forecasted transactions that are attributable to a specific risk. Benefit plans - Unamortized prior service costs and net actuarial losses (gains) related to pension and retiree health and life benefits...

  • Page 143
    ... For purposes of Consumer-related discussion, subprime includes consumer finance products like mortgage, auto, cards, sales finance and personal loans to U.S. and global borrowers whose credit score implies a higher probability of default based upon GECC's proprietary scoring models and definitions...

  • Page 144
    ... 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 internal...

  • Page 145
    ... December 31, 2014. Our independent registered public accounting firm has issued an audit report on our internal control over financial reporting. Their report follows. /s/ Jeffrey R. Immelt Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer February 27, 2015    /s/ Jeffrey...

  • Page 146
    ... audited the accompanying statement of financial position of General Electric Company and consolidated affiliates (the "Company") as of December 31, 2014 and 2013, and the related statements of earnings, comprehensive income, changes in shareowners' equity and cash flows for each of the years in the...

  • Page 147
    ... and Bank Deposits Investment Contracts, Insurance Liabilities and Insurance Annuity Benefits Postretirement Benefit Plans All Other Liabilities Income Taxes Shareowners' Equity Other Stock-related Information Other Income GECC Revenues from Services Supplemental Cost Information Earnings Per Share...

  • Page 148
    ... per share Dividends declared per common share See Note 3 for other-than-temporary impairment amounts. See accompanying notes. 128 GE 2014 FORM 10-K 2014 $ 76,568 30,190 778 41,053 148,589 General Electric Company and consolidated affiliates 2013 $ 71,873 28,669 3,108 42,395 146,045 $ 2012 72...

  • Page 149
    ... 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 shown for "GE" and "GECC." Transactions between GE and GECC have...

  • Page 150
    ... INCOME For the years ended December 31 (In millions) Net earnings Less net earnings (loss) attributable to noncontrolling interests Net earnings attributable to the Company Other comprehensive income (loss) Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other...

  • Page 151
    ... to the Company Net sales (purchases) of shares for treasury Changes in other capital Ending balance at December 31 Noncontrolling interests Total equity balance at December 31 See Note 15 for further information about changes in shareowners' equity. See accompanying notes. $ 2014 130,566...

  • Page 152
    ... Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other capital Retained earnings Less common stock held in treasury Total GE shareowners' equity Noncontrolling interests(c) Total equity (Note 15 and 16) Total liabilities and equity $ General Electric Company and...

  • Page 153
    ... shares outstanding at year-end both 2014 and 2013, respectively) Accumulated other comprehensive income (loss) - net attributable to GE Investment securities Currency translation adjustments Cash flow hedges Benefit plans Other capital Retained earnings Less common stock held in treasury Total GE...

  • Page 154
    ... Supplemental disclosure of cash flows information Cash paid during the year for interest Cash recovered (paid) during the year for income taxes See accompanying notes. $ General Electric Company and consolidated affiliates 2014 2013  15,345 $ 112 15,233 112 13,355 $ 298 13,057 2,120 2012 13,864...

  • Page 155
    ... $ Supplemental disclosure of cash flows information Cash paid during the year for interest $ Cash recovered (paid) during the year for income taxes 2014 15,183 $ (50) 15,233 112 GE(a) 2013 13,302 $ 245 13,057 2,120 2012 13,801 $ 160 13,641 983 Financial Services (GECC) 2014 2013 7,396 $ 162 7,234...

  • Page 156
    ...a first step in a planned, staged exit from that business. Synchrony Financial closed the IPO of 125 million shares of common stock at a price to the public of $23.00 per share and on September 3, 2014, Synchrony Financial issued an additional 3.5 million shares of common stock pursuant to an option...

  • Page 157
    ... our eight businesses, focused on the broad markets they serve: Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation, Appliances & Lighting and GE Capital. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing...

  • Page 158
    ... unit contracts, military development contracts, locomotive production contracts, and long-term construction projects, using long-term construction and production contract accounting. We estimate total long-term contract revenue net of price concessions as well as total contract costs. For goods...

  • Page 159
    ... are generally depreciated on a straight-line basis. The cost of GECC equipment leased to others on operating leases is depreciated on a straight-line basis to estimated residual value over the lease term or over the estimated economic life of the equipment. The cost of GECC acquired real estate...

  • Page 160
    ... E S The cost of individually significant customer relationships is amortized in proportion to estimated total related sales; cost of other intangible assets is generally amortized on a straight-line basis over the asset's estimated economic life. We review long-lived assets for impairment whenever...

  • Page 161
    ... entire portfolio for potential specific credit or collection issues that might indicate an impairment. For larger-balance, non-homogeneous loans and leases, we consider the financial status, payment history, collateral value, industry conditions and guarantor support related to specific customers...

  • Page 162
    ..."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-ended revolving loans at 180...

  • Page 163
    ... cost basis and its fair value in earnings. Realized gains and losses are accounted for on the specific identification method. Unrealized gains and losses on investment securities classified as trading and certain retained interests are included in earnings. INVENTORIES All inventories are stated...

  • Page 164
    ... useful lives unless such lives are deemed indefinite. The cost of intangible assets is generally amortized on a straight-line basis over the asset's estimated economic life, except that individually significant customer-related intangible assets are amortized in relation to total related sales...

  • Page 165
    ...fair value on a recurring basis. Investments in Debt and Equity Securities. When available, we use quoted market prices to determine the fair value of investment securities, and they are included in Level 1. Level 1 securities primarily include publicly traded equity securities. For large numbers of...

  • Page 166
    ... services as our primary basis for valuation when there is limited, or no, relevant market activity for a specific instrument or for other instruments that share similar characteristics. We have not adjusted the prices we have obtained. Investment securities priced using non-binding broker quotes...

  • Page 167
    ... a discounted cash flow 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 net asset values...

  • Page 168
    ... pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity's holding are not permitted in a fair value measurement. Adopting these amendments had no effect on the financial statements. 148 GE 2014...

  • Page 169
    ...We completed the sale of our Consumer auto and personal loan business in Portugal on July 15, 2013 for proceeds of $83 million. FINANCIAL INFORMATION FOR ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE December 31 (In millions) Assets Cash and equivalents Investment securities Current receivables...

  • Page 170
    ...825 million after tax) on the sale of our 49% common equity interest in NBCU LLC and $921 million ($564 million after tax) on the sale of GECC's real estate properties. DISCONTINUED OPERATIONS Discontinued operations primarily comprised GE Money Japan (our Japanese personal loan business, Lake, and...

  • Page 171
    ... 2014. FINANCIAL INFORMATION FOR GE MONEY JAPAN (In millions) Earnings (loss) from discontinued operations, net of taxes $ 2014 59 $ 2013 (1,636) $ 2012 (649) WMC During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan...

  • Page 172
    ... rates or losses WMC incurs on repurchased loans differ from its assumptions. FINANCIAL INFORMATION FOR WMC (In millions) Total revenues and other income (loss) Earnings (loss) from discontinued operations, net of taxes $ $ 2014 (291) (199) $ $ 2013 (346) (232) $ $ 2012 (500) (337) 152 GE 2014...

  • Page 173
    ...(121) (195) GE INDUSTRIAL 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 treatment of...

  • Page 174
    ... cost 2013 Gross Gross unrealized unrealized gains losses Estimated fair value December 31 (In millions) GE Debt U.S. corporate Corporate - non-U.S. Equity Available-for-sale Trading GECC Debt U.S. corporate State and municipal Residential mortgage-backed(a) Commercial mortgage-backed Asset...

  • Page 175
    ... within the foreseeable future. Our corporate debt portfolio comprises securities issued by public and private corporations in various industries, primarily in the U.S. Substantially all of our corporate debt securities are rated investment grade by the major rating agencies. GE 2014 FORM 10-K 155

  • Page 176
    ... loans of high-quality, middle-market companies in a variety of industries, as well as a variety of diversified pools of assets such as student loans and credit cards. The vast majority of the securities in our ABS portfolio are in a senior position in the capital structure of the deals. PRE-TAX...

  • Page 177
    ... and redemptions of non-U.S. corporate and asset-backed securities in our CLL business. The 2013 amount also included proceeds from the sale of Comcast guaranteed debt and short-term securities in our Treasury operations. We recognized pre-tax gains (losses) on trading securities of $10 million, $48...

  • Page 178
    ... of the balances primarily relate to revenue sharing programs and other non-income taxes. NOTE 5. INVENTORIES December 31 (In millions) GE Raw materials and work in process Finished goods Unbilled shipments Less revaluation to LIFO Total GE GECC Finished goods Total consolidated $ 2014 9,820 7,126...

  • Page 179
    ... 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 and other manufacturing, power generation, and commercial equipment and facilities. For...

  • Page 180
    ... credit portfolio. Prior-period amounts were reclassified to conform to the current-period presentation. FINANCING RECEIVABLES (In millions) Commercial CLL Americas International Total CLL Energy Financial Services GE Capital Aviation Services (GECAS) Other Total Commercial Real Estate Consumer...

  • Page 181
    ...Commercial Real Estate Consumer Non-U.S. residential mortgages Non-U.S. installment and revolving credit U.S. installment and revolving credit Other Total Consumer Total $ 2013 Commercial CLL Americas International Total CLL Energy Financial Services GECAS Other Total Commercial Real Estate Consumer...

  • Page 182
    ... millions) 2012 Commercial CLL Americas International Total CLL Energy Financial Services GECAS Other Total Commercial Real Estate Consumer Non-U.S. residential mortgages Non-U.S. installment and revolving credit U.S. installment and revolving credit Other Total Consumer Total $ Balance at January...

  • Page 183
    ... E N T NOTE 7. PROPERTY, PLANT AND EQUIPMENT Depreciable lives-new (in years) Original Cost 2014 Net Carrying Value 2014 2013 December 31 (Dollars in millions) GE Land and improvements Buildings, structures and related equipment Machinery and equipment Leasehold costs and manufacturing plant under...

  • Page 184
    ... intangible assets of approximately $320 million. The allocation of purchase prices will be finalized upon completion of post-closing procedures. In August 2013, we acquired the aviation business of Avio S.p.A. (Avio) for $4,449 million in cash. We recorded a pre-tax acquisition-related charge...

  • Page 185
    ...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 rates...

  • Page 186
    ... discounted at a higher risk-adjusted rate or market multiples decrease. As of December 31, 2014, we believe that the goodwill is recoverable for all of the reporting units; however, there can be no assurances that the goodwill will not be impaired in future periods. In 2013, while the Real Estate...

  • Page 187
    ... follow. COMPONENTS OF FINITE-LIVED INTANGIBLE ASSETS ACQUIRED DURING 2014   (In millions) Customer-related Patents and technology Capitalized software Trademarks Lease valuations All other $ Gross carrying value 731 178 1,123 52 1 6 Weighted-average amortizable period (in years) 14.1 10.8 5.7 17...

  • Page 188
    ... was made to dispose of them through sale or other means. At December 31, 2014 and 2013, 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...

  • Page 189
    ... GE Commercial paper Payable to banks Current portion of long-term borrowings Other Total GE short-term borrowings GECC Commercial paper U.S. Non-U.S. Current portion of long-term borrowings(b)(c)(f) GE Interest Plus notes(d) Other(c) Total GECC short-term borrowings Eliminations Total short-term...

  • Page 190
    ... 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 2014 and 2013. (b) Substantially all unpaid claims and claims adjustment expenses and unearned premiums . When insurance affiliates cede insurance risk...

  • Page 191
    ...) Service cost for benefits earned Prior service cost amortization Expected return on plan assets Interest cost on benefit obligations Net actuarial loss amortization Curtailment loss Pension plans cost $ 2014 Total 2013 2012 Principal pension plans 2014 2013 2012 Other pension plans 2014 2013 403...

  • Page 192
    ... December 31 are used to measure the year-end benefit obligations and the pension costs for the subsequent year. December 31 Discount rate Compensation increases Expected return on assets 2014 4.02% 4.10 7.50 Principal pension plans 2013 2012 4.85% 4.00 7.50 3.96% 3.90 8.00 2011 4.21% 3.75 8.00...

  • Page 193
    ...at January 1 Service cost for benefits earned Interest cost on benefit obligations Participant contributions Plan amendments Actuarial loss (gain) Benefits paid Acquisitions (dispositions) / other - net Exchange rate adjustments Balance at December 31(c) (a) (b) (c) $ Principal pension plans 2014 58...

  • Page 194
    ...above or below a target range. Plan fiduciaries monitor the GE Pension Plan's liquidity position in order to meet the near -term benefit payment and other cash needs. The GE Pension Plan holds short-term debt securities to meet its liquidity needs. GE Pension Trust assets are invested subject to the...

  • Page 195
    ... of the fair value of trust assets at the time of purchase. GE securities represented 3.8% and 4.5% of trust assets at year-end 2014 and 2013, respectively. The GE Pension Plan has a broadly diversified portfolio of investments in equities, fixed income, private equities, real estate and hedge funds...

  • Page 196
    ... related to assets still held and $144 million for assets no longer held. (b) Transfers in and out of Level 3 are considered to occur at the beginning of the period. CHANGES IN LEVEL 3 INVESTMENTS FOR THE YEAR ENDED DECEMBER 31, 2013    (In millions) Debt securities Private equities Real estate...

  • Page 197
    ... former salaried employees and eligible dependents. Effective January 1, 2015, the Company will provide eligible participants with a Retiree Reimbursement Account to help pay for coverage purchased through a private exchange instead of offering our current post-65 retiree health plans. GE 2014 FORM...

  • Page 198
    ... at December 31 are used to measure the year-end benefit obligations and the retiree benefit plan costs for the subsequent year. December 31 Discount rate Compensation increases Expected return on assets Initial healthcare trend rate(b) 2014 3.89% 4.10 7.00 6.00 2013 4.61%(a) 4.00 7.00 6.00...

  • Page 199
    ... loss (gain) Benefits paid Balance at December 31(c) (a) Primarily associated with discount rate and mortality assumption changes. (b) Primarily associated with discount rate change and lower costs from new healthcare supplier contracts. (c) The APBO for the retiree health plans was $8,445 million...

  • Page 200
    ...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 cost (credit) Net actuarial gain Total (a) Fair value...

  • Page 201
    ...unrecognized tax benefits, environmental remediation, asset retirement obligations, derivative instruments, product warranties and a variety of sundry items. Accruals for non-current compensation and benefits amounted to $42,354 million and $27,853 million at December 31, 2014 and 2013, respectively...

  • Page 202
    ... Non - U.S. Current Deferred Other Total $ 2014 51 (177) 2,978 (849) (231) 1,772 $ 2013 85 (2,315) 3,659 (1,038) 285 676 $ 2012 685 (414) 2,871 (773) 165 2,534 $ $ $ (a) Includes the benefit from GECC deductions and credits applied against GE's current U.S. tax expense. 182 GE 2014 FORM 10-K

  • Page 203
    ... of GECC in before-tax earnings of GE Tax on global activities including exports(a) U.S. business credits(b) Business Property disposition All other - net Actual income tax rate 2014 Consolidated 2013 35.0 % 2012 35.0 % 2014 35.0 % GE 2013 35.0 % 2012 35.0 % 2014 35.0 % GECC 2013 35.0 % 2012 35...

  • Page 204
    ... tax rate(a) (a) Some portion of such reduction may be reported as discontinued operations. $ 2014 5,619 4,059 807 103 0-900 0-300 $ 2013 5,816 4,307 975 164 0-900 0-350 UNRECOGNIZED TAX BENEFITS RECONCILIATION (In millions) Balance at January 1, Additions for tax positions of the current year...

  • Page 205
    ...(a) Retiree insurance plans Non-U.S. loss carryforwards(b) Contract costs and estimated earnings Intangible assets Depreciation Investment in global subsidiaries Other - net GECC Operating leases Financing leases Intangible assets Net unrealized gains (losses) on securities Cash flow hedges Non...

  • Page 206
    ... 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 exercise...

  • Page 207
    ... of our common stock through 2015. Under this program, on a book basis, we repurchased shares of 73.6 million, 432.6 million and 248.6 million for a total of $1,901 million, $10,375 million and $5,185 million for the years ended 2014, 2013 and 2012 respectively. GE's authorized common stock consists...

  • Page 208
    ...to deferred acquisition costs, present value of future profits, and investment contracts, insurance liabilities and insurance annuity benefits in our run-off insurance operations to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and...

  • Page 209
    ...consolidated affiliates includes common shares in consolidated affiliates and preferred stock issued by our affiliates. GECC preferred stock is presented as noncontrolling interests in the GE consolidated Statement of Financial Position. GECC preferred stock dividends are presented as noncontrolling...

  • Page 210
    ... & development partner funding arrangements, acquisitions and eliminations. OTHER During the second quarter of 2013, GECC issued 10,000 shares of non-cumulative perpetual preferred stock with a $0.01 par value for proceeds of $990 million. The preferred shares bear an initial fixed interest rate of...

  • Page 211
    ... by the Management Development and Compensation Committee, which consists entirely of independent directors. STOCK COMPENSATION PLANS Securities to be issued upon exercise Weighted average exercise price Securities available for future issuance December 31, 2014 (Shares in thousands) Approved...

  • Page 212
    ...the fair value of options granted during 2014, 2013 and 2012, respectively: risk-free interest rates of 2.3%, 2.5% and 1.3%; dividend yields of 3.1%, 4.0% and 4.0%; expected volatility of 26%, 28% and 29%; and expected lives of 7.3 years, 7.5 years and 7.8 years. Risk-free interest rates reflect the...

  • Page 213
    ... of each restricted stock unit is the market price of our stock on the date of grant. The weighted average grant date fair value of RSUs granted during 2014, 2013 and 2012 was $26.08, $24.54 and $20.79, respectively. The total intrinsic value of RSUs vested during 2014, 2013 and 2012 amounted to $86...

  • Page 214
    ... million. During 2012, we sold our remaining equity interest in Garanti Bank, which was classified as an available-for-sale security. (c) During 2013, we sold real estate comprising certain floors located at 30 Rockefeller Center, New York for a pre-tax gain of $902 million. (d) During 2014, we sold...

  • Page 215
    ... used to build and maintain certain engines, under which GE and these participants share in risks and rewards of these product programs. GE's payments to participants are recorded as cost of services sold ($873 million, $820 million and $594 million for the years 2014, 2013 and 2012, respectively...

  • Page 216
    ... of GE common stock outstanding Employee compensation-related shares (including stock options) and warrants Total average equivalent shares Per-share amounts Earnings from continuing operations Earnings (loss) from discontinued operations Net earnings $ 2014 Diluted Basic 2013 Diluted Basic 2012...

  • Page 217
    ... Equity Available-for-sale Trading Derivatives(d) Other(e) Total Liabilities Derivatives Other(f) Total December 31, 2013 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...

  • Page 218
    ... 31 2014 Investment securities Debt U.S. corporate State and municipal RMBS CMBS ABS Corporate - non-U.S. Government - non-U.S. U.S. government and federal agency Retained interests Equity Available-for-sale Derivatives(d)(e) Other Total 2013 Investment securities Debt U.S. corporate State and...

  • Page 219
    ... basis and still held at December 31, 2014 and 2013. Years ended December 31 2014 $ (317) (388) (794) (1,499) $ (In millions) Financing receivables and loans held for sale Cost and equity method investments Long-lived assets, including real estate Total 2013 (361) (484) (1,188) (2,033) $ $ GE...

  • Page 220
    ...for sale Cost and equity method investments $ 666 346 Long-lived assets, including real estate December 31, 2013 Recurring fair value measurements Investment securities - Debt U.S. corporate Asset-backed Corporate - non-U.S. Other financial assets 932 Income approach, Business enterprise value...

  • Page 221
    ...250 million at December 31, 2014 and 2013, respectively . A description of how we estimate fair values follows: Loans. Based on a discounted future cash flows methodology, using current market interest rate data adjusted for inherent credit risk or quoted market prices and recent transactions, if...

  • Page 222
    ... methodologies using current market interest rate data adjusted for inherent credit risk. Assets and liabilities that are reflected in the accompanying financial statements at fair value are not included in the above disclosures; such items include cash and equivalents, investment securities and...

  • Page 223
    ...interest rate, 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...

  • Page 224
    ... 2014 (1) (541) (4) (546) $ 2013 (26) 941 (6) 909 2013 (364) 817 (5) 448 $ $ $ $ (a) Gain (loss) is recorded in GECC revenues from services, interest and other financial charges, and other costs and expenses when reclassified to earnings. The total pre-tax amount in AOCI related to cash flow...

  • Page 225
    ... entered into 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...

  • Page 226
    ... below, investors in these entities only have recourse to the assets owned by the entity and not to our general credit. We do not have implicit support arrangements with any VIE. We did not provide noncontractual support for previously transferred financing receivables to any VIE in 2014 or 2013. In...

  • Page 227
    ... receivables must first be used to pay third-party debt holders as well as other expenses of the entity. Excess cash flows are available to GE. The creditors of these entities have no claim on other assets of GE. x Other remaining assets and liabilities of consolidated VIEs relate primarily to three...

  • Page 228
    ... debt holder consent to sell these assets. The receivables will be included in assets of businesses held for sale when the consent is received. Total revenues from our consolidated VIEs were $8,012 million, $7,540 million and $7,127 million in 2014, 2013 and 2012, respectively. Related expenses...

  • Page 229
    ... 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. Other significant unconsolidated VIEs include investments in real estate entities ($1,564 million), which generally consist...

  • Page 230
    ... such arrangements, our guarantee is secured, usually by the asset being purchased or financed, or possibly by certain other assets of the customer or associated company. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. The...

  • Page 231
    ...2014, 2013 and 2012, respectively. Certain supplemental information related to our cash flows is shown below. For the years ended December 31 (In millions) GE Net dispositions (purchases) of GE shares for treasury Open market purchases under share repurchase program Other purchases Dispositions GECC...

  • Page 232
    ... arms-length basis, are eliminated and consist primarily of GECC dividends to GE; 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 technology (IT) and...

  • Page 233
    ... quality of our Commercial, Real Estate and Consumer financing receivables portfolios is provided below. For each portfolio, we describe the characteristics of the financing receivables and provide information about collateral, payment performance, credit quality indicators and impairment. We manage...

  • Page 234
    ...million on a cash basis, at December 31, 2014 and 2013, respectively, principally in our Consumer-U.S. installment and revolving credit portfolios. The total average investment in impaired loans at December 31, 2014 and 2013 was $2,667 million and $3,156 million, respectively. 214 GE 2014 FORM 10-K

  • Page 235
    ... debt service coverage to meet contractual interest obligations. Impaired loans at CLL primarily represent senior secured lending positions. IMPAIRED LOAN BALANCE CLASSIFIED BY THE METHOD USED TO MEASURE IMPAIRMENT December 31 (In millions) Discounted cash flow Collateral value Total $ $ 2014...

  • Page 236
    ... 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 interest, even if the modified loans are expected to be fully recoverable. For the year ended...

  • Page 237
    ... loans have been modified under these short-term programs to continue to be able to meet their contractual obligations upon the conclusion of the shortterm modification. SUPPLEMENTAL CREDIT QUALITY INFORMATION COMMERCIAL Substantially all of our Commercial financing receivables portfolio is secured...

  • Page 238
    ... Total $ $ $ $ $ $ $ $ For our secured financing receivables portfolio, our collateral position and ability to work out problem accounts mitigate our losses. Our asset managers have deep industry expertise that enables us to identify the optimum approach to default situations. We price risk...

  • Page 239
    ... medium-sized enterprises predominantly secured by auto and equipment, inventory finance, and cash flow 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...

  • Page 240
    ...our credit line underwriting management and collection strategies based on customer behavior and risk profile changes. Consumer - Other We develop our internal risk ratings for this portfolio in a manner consistent with the process used to develop our Commercial credit quality indicators, described...

  • Page 241
    ... GE's electrification business. Global teams design leading technology solutions for the delivery, management, conversion and optimization of electrical power for customers across multiple energy-intensive industries. GE has invested in our Energy Management capabilities, with strategic acquisitions...

  • Page 242
    ... and products worldwide for businesses of all sizes. Services include commercial loans and leases, fleet management, financial programs, credit cards, personal loans and other financial services. GE Capital also develops strategic partnerships and joint ventures that utilize GE's industry-specific...

  • Page 243
    ...Water $ Oil & Gas Energy Management Aviation Healthcare Transportation Appliances & Lighting Total industrial GE Capital Corporate items and eliminations(c) Total $ 2014 Total revenues(a) 2013 24,724 $ 16,975 7,569 21,911 18,200 5,885 8,338 103,602 44,067 (1,624) 146,045 $ 2012 28,299 $ 15,241 7,412...

  • Page 244
    ... $ $ Provision (benefit) for income taxes 2014 2013 138 $ 1,634 1,772 $ (992) $ 1,668 676 $ 2012 521 2,013 2,534 (a) Included amounts for Power & Water, Oil & Gas, Energy Management, Aviation, Healthcare, Transportation and Appliances & Lighting, for which our measure of segment profit excludes...

  • Page 245
    ..., Enterprise Risk & Operations Senior Vice President, Human Resources Vice Chairman of General Electric Company; President & CEO, Global Growth & Operations Vice Chairman of General Electric Company; CEO, GE Capital Age 58 49 54 67 55 57 61 58 56 All Executive Officers are elected by the Board of...

  • Page 246
    ...as amended, of General Electric Company (Incorporated by reference to Exhibit 3(ii) of General Electric's Current Report on Form 8-K dated February 11, 2015 (Commission file number 001-00035)). Amended and Restated General Electric Capital Corporation (GECC) Standard Global Multiple Series Indenture...

  • Page 247
    ... Company and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 4.1 to General Electric's Current Report on Form 8-K filed on October 9, 2012 (Commission file number 001-00035)). Thirteenth Amended and Restated Fiscal and Paying Agency Agreement among GECC, GE Capital...

  • Page 248
    ... Performance Stock Unit Grants to Executive Officers under the General Electric Company 2007 Long-term Incentive Plan (Incorporated by reference to Exhibit 10.6 of General Electric's Current Report on Form 8-K dated April 27, 2007 (Commission file number 001-00035)). (o) (p) (q) (r) 228 GE 2014...

  • Page 249
    ...24, 2015, between the Registrant and General Electric Capital Corporation (Incorporated by reference to Exhibit 10 to GECC's Annual Report on Form 10-K for the year ended December 31, 2014 (Commission file number 001-06461)). Transaction Agreement dated as of February 12, 2013 among General Electric...

  • Page 250
    ... (Incorporated by reference to Exhibit 12(a) to GECC's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (Commission file number 001-06461)). Supplement to Present Required Information in Searchable Format* The following materials from General Electric Company's Annual Report on...

  • Page 251
    ... About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information   Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership...

  • Page 252
    ... annual report on Form 10-K for the fiscal year ended December 31, 2014, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of th Connecticut on the 27 day of February 2015. General Electric Company (Registrant...

  • Page 253
    ... current credit rating and the impact on our funding costs and competitive position if we do not do so; x the adequacy of our cash flows and earnings and other conditions which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels; x GECC...

  • Page 254
    ..."Contact Us" section of the website. STOCK EXCHANGE INFORMATION For information about GE's consumer products and services, visit us at www.ge.com. CORPORATE OMBUDSPERSON To report concerns related to compliance with the law, GE policies or government contracting requirements, write to GE Corporate...

  • Page 255
    ... GROUP Best Companies for Leadership WORKING MOTHER Best Companies for Working Mothers ETHISPHERE World's Most Ethical Companies Design by Addison www.addison.com The paper used in this report was supplied by participants of the Responsible Initiative Programs. The majority of the power utilized...

  • Page 256
    General Electric Company Fairfield, Connecticut 06828 www.ge.com 3.EPC055148101A.105