GE 2008 Annual Report Download - page 33

management’s discussion and analsis
ge 2008 annual report 31
Geographic Operations
Our global activities span all geographic regions and primarily
encompass manufacturing for local and export markets, import
and sale of products produced in other regions, leasing of aircraft,
sourcing for our plants domiciled in other global regions and
provision of financial services within these regional economies.
Thus, when countries or regions experience currency and/or
economic stress, we often have increased exposure to certain
risks, but also often have new profit opportunities. Potential
increased risks include, among other things, higher receivable
delinquencies and bad debts, delays or cancellations of sales and
orders principally related to power and aircraft equipment, higher
local currency financing costs and slowdown in established finan-
cial services activities. New profit opportunities include, among
other things, more opportunities for lower cost outsourcing,
expansion of industrial and financial services activities through
purchases of companies or assets at reduced prices and lower
U.S. debt financing costs.
Revenues are classified according to the region to which
products and services are sold. For purposes of this analysis, U.S.
is presented separately from the remainder of the Americas. We
classify certain operations that cannot meaningfully be associated
with specific geographic areas as “Other Global” for this purpose.
GEOGRAPHIC REVENUES
(In billions) 2008 2007 2006
U.S. $ 85.3 $ 86.2 $ 81.1
Europe 44.0 39.9 32.6
Pacific Basin 23.6 21.8 17.7
Americas 14.8 12.6 11.5
Middle East and Africa 10.1 8.0 5.5
Other Global 4.7 4.0 3.2
Total $182.5 $172.5 $151.6
Global revenues rose 13% to $97.2 billion in 2008, compared with
$86.3 billion and $70.5 billion in 2007 and 2006, respectively.
Global revenues to external customers as a percentage of consoli-
dated revenues were 53% in 2008, compared with 50% and 47%
in 2007 and 2006, respectively. The effects of currency fluctuations
on reported results were to increase revenues by $2.0 billion,
$4.0 billion and $0.1 billion in 2008, 2007 and 2006, respectively.
GE global revenues in 2008 were $59.4 billion, up 19% over
2007, led by increases at Energy Infrastructure and Technology
Infrastructure, primarily in the Middle East and Africa, Europe and
the Pacific Basin. GE global revenues as a percentage of total GE
revenues was 53% in 2008, compared with 50% and 48% in 2007
and 2006, respectively. GE global revenues were $49.8 billion in
2007, up 16% over 2006, led by increases at Energy Infrastructure
and Technology Infrastructure, primarily in the Middle East and
Africa, Europe and the Pacific Basin.
DISCONTINUED OPERATIONS
(In millions) 2008 2007 2006
Earnings (loss) from discontinued
operations, net of taxes $(679) $(249) $1,398
Discontinued operations comprised GE Money Japan; WMC;
Plastics; Advanced Materials; GE Life, our U.K.-based life insurance
operation; the property and casualty insurance and reinsurance
businesses and the European life and health operations of GE
Insurance Solutions and most of its affiliates; and Genworth, our
formerly wholly-owned subsidiary that conducted most of our
consumer insurance business, including life and mortgage
insurance operations. Results of these businesses are reported
as discontinued operations for all periods presented.
During the third quarter of 2007, we committed to a plan to sell
our Lake business and recorded an after-tax loss of $0.9 billion,
which represents the difference between the net book value of
our Lake business and the projected sale price. During 2008, we
completed the sale of GE Money Japan, which included Lake,
along with our Japanese mortgage and card businesses, excluding
our minority ownership interest in GE Nissen Credit Co., Ltd. In
connection with this sale, and primarily related to our Japanese
mortgage and card businesses, we recorded an incremental
$0.4 billion loss in 2008.
In December 2007, we completed the sale of our WMC busi-
ness for $0.1 billion in cash, recognizing an after-tax loss of
$0.1 billion. In connection with the transaction, certain contractual
obligations and potential liabilities related to previously sold loans
were retained.
In August 2007, we completed the sale of our Plastics business
to Saudi Basic Industries Corporation for $11.6 billion in cash. As
a result, we recognized an after-tax gain of $1.6 billion.
Loss from discontinued operations, net of taxes, in 2008 was
$0.7 billion, primarily reflecting a loss from operations ($0.3 billion),
and the estimated incremental loss on disposal ($0.4 billion) at
GE Money Japan.
Loss from discontinued operations, net of taxes, in 2007 was
$0.2 billion, reflecting a loss from operations at WMC ($0.9 billion),
an estimated after-tax loss on the planned sale of Lake ($0.9 bil-
lion), a loss from operations at GE Money Japan ($0.3 billion), and
an after-tax loss on the sale of our WMC business ($0.1 billion),
partially offset by a tax adjustment related to the 2004 initial public
offering of Genworth ($0.1 billion). This was partially offset by an
after-tax gain on sale of our Plastics business ($1.6 billion) and
earnings from Plastics operations ($0.3 billion).
Earnings from discontinued operations, net of taxes, in 2006
were $1.4 billion, reflecting earnings at our Plastics and Advanced
Materials businesses ($1.0 billion). Also included in these earnings
were earnings at GE Money Japan and WMC ($0.3 billion), Genworth
($0.2 billion) and GE Insurance Solutions ($0.1 billion), partially off-
set by a loss at GE Life ($0.2 billion).
For additional information related to discontinued operations,
see Note 2.