P5-52. Non-GAAP Disclosures L01, 5 RAYTHEON COMPANY

(RTN) •

L07 General Electr ic (GE) disclosed the fo llowing non-GAAP reconciliation for its Industrial segment from GENERAL its 20 18 Form 10-K. ELECTRIC (GE)

$millions 2018 2017 2016 GE Industrial earnings (loss) . .............. . ........ • .. $(20,587) $(1 ,841) $ 9,048 Less: Nonoperating pension benefit costs (net of tax) . ... .... (2 ,184) (1 ,550) (1 ,527)

Less: Gains and impairments for disposed or held for sale businesses (net of tax) . .. .. .. . ....... . .. . ...... . . 974 864 2,374 Less: Restructuring and other (net of tax) ..... . .. . • .. . . • .. (2 ,948) (2,778) (2,483)

Less: Goodwill impairments (net of tax) ................... (22,371) (1 ,156)

Less: GE Industrial U.S. tax reform enactment adjustment .. . . (38) (4,905)

Adjusted GE Industrial earnings (loss) (Non-GAAP) .. .. . .. .. $ 5,980 $ 7,685 $10,684 Required

a. Explain how the non-GAAP items (in total) affected adjusted earnings each year. Are the adjustments significant?

b. GE makes five specific adjustments. Are any of the adjustments likely beyond the company's control?

c. Calculate the year-over-year change (in % terms) in reported net income for 2017 and 20 18. Calculate the year-over-year change (in % terms) in the non-GAAP net income. Which trend do we believe more accurately depicts GE's performance over this period?