GE 2007 Annual Report Download - page 112

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110 ge 2007 annual report
 
U.S. GAAP requires earnings of discontinued operations to be
displayed separately in the Statement of Earnings. Accordingly,
the numerators used in our calculations of returns on average
shareowners’ equity and average total capital invested, presented
in the Selected Financial Data section, exclude those earnings
(losses). Further, we believe that it is appropriate to exclude from
the denominators, specifi cally the average total shareowners’
equity component, the cumulative effect of those earnings for
each of the years for which related discontinued operations were
presented, as well as our average net investment in discontinued
operations since the second half of 2005. Had we disposed of
these operations before mid-2005, proceeds would have been
applied to reduce parent-supported debt at GE Capital; however,
since parent-supported debt at GE Capital was retired in the fi rst
half of 2005, we have assumed that any proceeds after that time
would have been distributed to shareowners by means of share
repurchases, thus reducing average total shareowners’ equity.
Defi nitions indicating how the above-named ratios are calcu-
lated using average total shareowners’ equity, excluding effects
of discontinued operations, can be found in the Glossary.
GE income tax rate, excluding GECS earnings
(In millions)
2007 2006 2005
GE earnings from continuing
operations before income taxes $25,262 $21,932 $20,032
Less GECS earnings from continuing
operations 12,428 10,255 9,004
Total
$12,834 $11,677 $11,028
GE provision for income taxes
$ 2,794 $ 2,552 $ 2,678
GE effective tax rate, excluding
GECS earnings 21.8% 21.9% 24.3%
Reconciliation of U.S. federal statutory income tax rate
to GE income tax rate, excluding GECS earnings
2007 2006 2005
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
Reduction in rate resulting from
Tax on global activities
including exports (9.9) (12.2) (9.1)
U.S. business credits (0.6) (0.7) (0.3)
All other — net (2.7) (0.2) (1.3)
(13.2) (13.1) (10.7)
GE income tax rate, excluding
GECS earnings
21.8% 21.9% 24.3%
We believe that meaningful analysis of our fi nancial performance
requires an understanding of the factors underlying that perfor-
mance and our judgments about the likelihood that particular
factors will repeat. In some cases, short-term patterns and
long-term trends may be obscured by large factors or events.
For example, events or trends in a particular segment may be so
signifi cant as to obscure patterns and trends of our industrial or
fi nancial services businesses in total. For this reason, we believe
that investors may fi nd it useful to see our revenue growth with-
out the effect of acquisitions, dispositions and currency exchange
rates, and without the effects of the 2006 and 2004 Olympics
broadcasts, the investigation-related adjustments and the reclas-
sifi cation of discontinued operations, which if included would
overshadow trends in ongoing revenues. Similarly, we believe
that investors would fi nd it useful to compare our 2007 operating
cash fl ow against our 2006 operating cash fl ow without the
effects of GECS dividends, which can vary from period to period,
and to compare our GE industrial segment’s operating margins
without the effects of the fi nancial services businesses within
Infrastructure.
We also believe that the sum of GE CFOA plus GE cash from
investing activities less the amounts paid for principal businesses
purchased and dividends paid represents an informative measure
of cash available for investing and fi nancing activities that we
refer to as free cash fl ow.
Delinquency rates on certain financing receivables
Delinquency rates on managed Commercial Finance equipment
loans and leases and managed GE Money fi nancing receivables
follow.
COMMERCIAL FINANCE
December 31 2007 2006 2005
Managed 1.21% 1.22% 1.31%
Off-book 0.71 0.52 0.76
On-book 1.33 1.42 1.53
GE MONEY
December 31 2007 2006 2005
Managed 5.36% 5.21% 5.34%
U.S. 5.52 4.93 5.00
Non-U.S. 5.30 5.32 5.47
Off-book 6.59 5.49 5.28
U.S. 6.64 5.49 5.28
Non-U.S. (a) (a) (a)
On-book 5.20 5.19 5.35
U.S. 4.78 4.70 4.89
Non-U.S. 5.31 5.32 5.47
(a) Not meaningful.