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AcmeCovers_VSA_rev3_0218.qxd 2/26/03 8:29 AM Page ICVR TABLE OF CONTENTS 4Letter to Stakeholders 11 L eadership Team 16 Breakthroughs 34 Our Businesses 39 Citizenship 40 Governance Acme 43 Financial Section VISIT OUR INTERACTIVE ONLINE ANNUAL REPORT AT www.ge.com/annual02 FINANCIAL HIGHLIGHTS CONSOLIDATED REVENUES EARNINGS PER SHARE BEFORE GE/S&P CUMULATIVE DIVIDEND (In billions) ACCOUNTING CHANGES GROWTH SINCE 1997 (In dollars) $138 $1.56 114% 115 1.30 95 92 1.04 76 69 0.78 57 46 0.52 38 23 0.26 19 Design:VSA Partners, Inc. photography: Stoll product Christian Principal photography: Forster Gerald Portrait World Printing: Quebecor 98 99 00 01 02 98 99 00 01 02 98 99 00 01 02 GE S&P 500 5010_00201_only_0218_2030.qxd 2/22/03 7:43 PM Page 1 Some companies manufacture locomotives, and some engineer thermoplastics for a living. Others design high-end cooktops; still others operate national TV networks. Not many, though, offer a full range of economy-fueling financial services on a global scale. Fewer still make jet engines. Or sophisticated medical scanners. Or multi-megawatt gas-fired power turbines. And only one company — just one — delivers on all these things. Only GE. 5010_00201_only_0218_2030.qxd 2/22/03 7:43 PM Page 2 KEN BOYDA HENRY HUBSCHMAN OMAR ISHRAK GEORGE OLIVER President and CEO, President and CEO, President and CEO, Ultrasound, Vice President, GE Interlogix GE Commercial Aviation Services GE Medical Systems GE Betz Securing the world with Keeping 1,100 aircraft Bringing ultrasound’s benefits to Building a new business out new technology leased and flying the four corners of the earth of the universal solvent BILL BANHOLZER DEE MELLOR STEVE SCHNEIDER WAYNE HEWETT Vice President, Vice President, President and CEO, President, GE Plastics GE Medical Systems GE China GE Plastics Pacific Hunting new molecules Building medical devices at Preparing the way in China Leading GE in the world’s for new uses 40 facilities in 10 countries for 5x5 in 2005 most vibrant plastics markets 2 GE 2002 ANNUAL REPORT 5010_00201_only_0218_2030.qxd 2/24/03 3:53 PM Page 3 NOW IS THE BEST TIME TO BE AT GE. SUSAN PETERS SUSAN TOWNSEND KATHY CASSIDY STEVE ZWOLINSKI JEFF ZUCKER Vice President, Advanced Technology Leader, Vice President President and CEO, President, Executive Development Global Research Center and Treasurer GE Wind Energy NBC Entertainment Grooming the leaders Finding fuel in earth’s most Maintaining GE’s financial Making power out Spotting the next must-see of GE’s future abundant element — hydrogen strength and flexibility of thin air TV program DAN O’CONNOR LI HSI RUBEN BERUMEN STEVE RAMSEY President and CEO, Regional Sales Manager, President and CEO, Vice President, GE Consumer Finance Europe GE Aircraft Engines GE Power Controls Environmental Programs Going from zero to Winning the engines order Increasing GE’s presence Fulfilling GE’s environmental, $700 million in five years for China’s regional jet in Europe health and safety commitments GE 2002 ANNUAL REPORT 3 5010_00201_only_0218_2030.qxd 2/22/03 7:44 PM Page 4 GARY L. ROGERS ROBERT C. WRIGHT JEFFREY R. IMMELT DENNIS D. DAMMERMAN Vice Chairman of the Board Vice Chairman of the Board Chairman of the Board Vice Chairman of the Board and Executive Officer and Executive Officer and Chief Executive Officer and Executive Officer 4 GE 2002 ANNUAL REPORT 5010_00201_only_0218_2030.qxd 2/22/03 7:44 PM Page 5 DEAR STAKEHOLDERS: GE is strong. In 2002, we grew earnings 7% and cash 10% in a tough economy, and our businesses improved their global positions with investments in technology and customer focus. We maintained our financial strength, remaining one of only seven Triple A-rated industrial companies, and GE’s terrific people prepared your company for success in the 21st century. There is much to be proud of. However, as measured by the stock price, this was a However, I am an optimist. In many ways, this was disappointing year for GE investors — including GE the best time to take over a company. That is because employees, who own almost 10% of our stock. We had the role of the CEO will, and should, change. And a targeted higher earnings growth, but as I will explain new CEO — especially an optimistic one — can embrace below, we had to increase reserves at ERC (Employers change with an open mind. Let me share a few thoughts Reinsurance Corporation), our reinsurance business. with you on how I am leading GE in this environment. We had to work through the general swirl around busi- I believe that our reputation for integrity and honor- ness practices and, perhaps most important, address able dealings is our most important asset. GE has not concerns about our future growth. Our stock was down been immune to the fallout from recent bull and bubble 39% for the year, more than the S&P 500, and GE now markets. I hear from investors who are concerned trades near the same level it did at the end of 1997. about the quality of corporate earnings, the need for a As managers, it is our principal job to make and solid balance sheet and sustainable cash flow, and the sell great products and services that people need and importance of responsible executive compensation thereby increase earnings. Since 1997, our earnings and accounting standards. Let me assure you that GE have grown more than 80%…far in excess of the S&P will lead on all of these fronts. 500’s performance. If you have held GE stock for 10 As one example, a substantial portion of my com- years or more, the average total annual return on your pensation is linked to the performance of GE stock. shares has been 15% — more than one and a half Nearly 70% of my net worth is in GE stock. I hold my times the 9% of the S&P 500. Through the cycles, your stock options to term (10 years), a practice I adopted GE management team has consistently grown earnings, when I became chairman and which I will continue. At and I, along with our many managers, have no doubt the same time, I have asked our board’s Compensation that we will be able to continue to do this. Committee to explore best practices on linking my pay This was not a great year to be a rookie CEO. With even more closely with investor interests. a tough economy, a volatile political environment, and I strive for openness. I am committed to putting the impact of 9/11 and industry cycles, business chal- investors inside GE every day. It will take some time to lenges were plentiful. Add to that the presumption of get this right, but I am committed to the process. I widespread corporate fraud and there were not too want investors to understand how GE grows, and that many normal days in 2002. our fundamentals are real and sustainable. When you GE 2002 ANNUAL REPORT 5 5010_00201_only_0218_2030.qxd 2/22/03 7:44 PM Page 6 LETTER TO STAKEHOLDERS The GE business model have high-performing businesses run by talented man- It starts with understanding our business model, agers, it is enjoyable to let the world know how the our strategy for growth and our values. job is getting done. For example, in July we divided GE Capital into four distinct financial services businesses, THE GE BUSINESS MODEL each with its own growth strategies, leverage and bal- CEOs don’t make the best economists. We make ance sheet. This makes them easier to grow internally commitments, not forecasts. But it’s safe to say and clarifies them externally. things are very different today than in the late 19 9 0 s. I believe in the GE team. I see every day just how We seem to be in the third year of a “post-bubble” special your GE team is. Its members are diverse and cycle, made worse by the 9/11 tragedy. This period is talented. They have unceasing curiosity and relentless characterized by slow economic growth — not a dou- drive. They understand the magic of GE…that what we ble dip, but without a spark — with tough pricing, imagine, we can make happen. Leading this group is the volatile capital markets, difficult industry cycles, the honor of my life. We are committed to work together, threat of war and low corporate trust. to deliver and always to put the company first. We don’t see this environment as a negative. Your GE team believes in high standards, and Rather, we believe this is an environment in which believes that strong integrity is the foundation of great companies make their own success. This is the time performance. I hold myself to a high standard, and I for us to create our own growth through bold ideas know you will do the same. and rigorous execution. And we have a business Here is how we performed in 2002: model that will enable us to grow in this economy. • Earnings before required accounting changes grew 7% Our Goal: To grow earnings 10%-plus annually to a record $15.1 billion. Earnings were on track to grow with 20%-plus return on total capital…reliably, 17% to $16.5 billion, but we recorded a $1.4 billion charge for increasing ERC’s reserves. sustainably, through the cycles. Getting there • Revenues grew 5% to $132 billion. Industrial sales grew depends on our solid business model: 8%, more than twice the GDP and exceeding our 2001 • A diverse set of leading businesses driving performance growth rate.