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Things Are Really Changing at GE. Just Read the Annual Report.

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General Electric plans to break itself into three parts.

Sebastien Bozon/AFP via Getty Images

General Electric

‘s latest annual report is more evidence that the company is shaking itself up. The document continues to get shorter as GE becomes a normal industrial conglomerate.

Report length might feel like an odd way to judge change at a company, but in past years, GE (ticker: GE) was famous for its complexity. The company makes a mix of expensive equipment that takes a long time to build and deliver, as well as running businesses servicing all that gear for a broad range of industries. GE has bought and sold huge businesses—transactions that generate reams of paper for investors to pore over. And don’t forget that for years, the conglomerate also ran what was essentially a huge banking organization for years: GE Capital.

GE’s quarterly results presentation from the fourth quarter of 2017, its slide deck for investors, press release, and supplemental information, ran to 61 pages.

Honeywell International’s

(HON) quarterly documents totaled 38 pages.

Enter Larry Culp. The current CEO took over in 2018, saying he wanted to simplify GE’s business. He sold assets, paid down debt, and scaled back GE Capital so much that it is no longer reported as a separate business segment.

And the simplification push continues. Culp unveiled plans in November to break the company up into three parts: one dedicated to aviation, one to health care and another to power generation.

He has cut more than 100 pages from the annual report too. GE’s 2017 annual report was 322 pages long, including all attachments. The report excluding attachments was 206 pages long. The 2021 report excluding required attachments is only 92, according to the company, down from 112 pages in 2020.

“In the spirit of Kaizen, the lean principle of continuous improvement, we were able to reduce the length of the 10k again, this time by 20 pages versus the prior year,” Steve Winoker, vice president of investor relations, said in a note to investors Friday.

There is a risk, of course, that shorter reports mean less detail. It’s still 237 pages with attachments and 92 pages without. On a comparable basis, Honeywell’s 2021 annual report is about 123 pages with attachments and 206 pages if they are included.

Annual reports always contain useful tidbits for investors. A key point for GE is that its pension funding improved in 2021. GE’s retiree pension obligations are now about 84% funded, based on standard accounting practices, up from 76% in 2020.

Asset returns, cash added, and changing interest rates all affect pension funding. Pension plans that are more than 80% funded, according to standard accounting practices, don’t typically drain cash from the company.

R&D spending came in at $3.7 billion for 2021, down from $3.8 billion in 2022. Falling R&D is a watch item for investors. It’s important to invest in products even if it means a hit to profit margins.

And with GE Capital no longer reported as a separate segment, the insurance operations that generated write-downs in past years are now reported in the corporate line item of the income statement. Insurance business details are still included in the notes to the financial statements.

GE stock closed down 1.9% Friday amid a broad market sell off. The

S&P 500
dropped 1.9%, while the

Dow Jones Industrial Average
slipped 1.4%.

Next up for GE investors will be March 10, when the company hosts its 2022 outlook event. That meeting will provide analysts and investors with more detail about the coming year.

Write to Al Root at

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