GE 2010 Annual Report Download - page 34

management’s discussion and analsis
32 GE 2010 ANNUAL REPORT
Operations
Our consolidated financial statements combine the
industrial manufacturing, services and media businesses of
General Electric Company (GE) with the financial services
businesses of General Electric Capital Services, Inc. (GECS or
financial services).
In the accompanying analysis of financial information, we
sometimes use information derived from consolidated financial
information but not presented in our financial statements pre-
pared in accordance with U.S. generally accepted accounting
principles (GAAP). Certain of these data are considered
“non-GAAP financial measures” under the U.S. Securities and
Exchange Commission (SEC) rules. For such measures, we have
provided supplemental explanations and reconciliations in the
Supplemental Information section.
We present Management’s Discussion of Operations in
five parts: Overview of Our Earnings from 2008 through 2010,
Global Risk Management, Segment Operations, Geographic
Operations and Environmental Matters. Unless otherwise indi-
cated, we refer to captions such as revenues and earnings from
continuing operations attributable to the company simply as
“revenues” and “earnings” throughout this Management’s
Discussion and Analysis. Similarly, discussion of other matters
in our consolidated financial statements relates to continuing
operations unless otherwise indicated.
Effective January 1, 2010, we reorganized our segments to
better align our Consumer & Industrial and Energy businesses
for growth. As a result of this reorganization, we created a
new segment called Home & Business Solutions that includes
the Appliances and Lighting businesses from our previous
Consumer & Industrial segment and the retained portion of the
GE Fanuc Intelligent Platforms business of our previous Enterprise
Solutions business (formerly within our Technology Infrastructure
segment). In addition, the Industrial business of our previous
Consumer & Industrial segment and the Sensing & Inspection
Technologies and Digital Energy businesses of our previous
Enterprise Solutions business are now part of the Energy busi-
ness within the Energy Infrastructure segment. The Security
business of Enterprise Solutions was reported in Corporate Items
and Eliminations until its sale in February 2010. Also, effective
January 1, 2010, the Capital Finance segment was renamed
GE Capital and includes all of the continuing operations of
General Electric Capital Corporation (GECC). In addition, the
Transportation Financial Services business, previously reported
in GE Capital Aviation Services (GECAS), is included in Commercial
Lending and Leasing (CLL) and our Consumer business in Italy,
previously reported in Consumer, is included in CLL.
Effective January 1, 2011, we reorganized the Technology
Infrastructure segment into three segments—Aviation, Healthcare
and Transportation. The results of the Aviation, Healthcare and
Transportation businesses are unaffected by this reorganization
and we will begin reporting these as separate segments beginning
with our quarterly report on Form 10-Q for the period ended
March 31, 2011. Results for 2010 and prior periods are reported on
the basis under which we managed our businesses in 2010 and do
not reflect the January 2011 reorganization.
Beginning in 2011, we will supplement our GAAP net earnings
and earnings per share (EPS) reporting by also reporting an oper-
ating earnings and EPS measure (non-GAAP). Operating earnings
and EPS will include service cost and plan amendment amortiza-
tion for our principal pension plans as these costs represent
expenses associated with employee benefits earned. Operating
earnings and EPS will exclude non-operating pension cost/
income such as interest cost, expected return on plans assets and
non-cash amortization of actuarial gains and losses. We believe
that this reporting will provide better transparency to the
employee benefit costs of our principal pension plans and
Company operating results.
Overview of Our Earnings from 2008 through 2010
Earnings from continuing operations attributable to the
Company increased 15% in 2010 after decreasing 39% in 2009,
reflecting the stabilization of overall economic conditions during
2010, following the challenging conditions of the last two years
and the effect on both our industrial and financial services
businesses. We believe that we are seeing signs of stabilization
in the global economy, including in financial services, as GECS
earnings from continuing operations attributable to the
Company increased 138% in 2010 compared with a decrease
of 83% in 2009. Net earnings attributable to the Company
increased 6% in 2010 after decreasing 37% in 2009, as losses
from discontinued operations in 2010 partially offset the 15%
increase in earnings from continuing operations. We have a
strong backlog entering 2011 and expect global economic
conditions to continue to improve through 2012.
Energy Infrastructure (25% and 33% of consolidated three-
year revenues and total segment profit, respectively) revenues
decreased 8% in 2010 and 6% in 2009 as the worldwide demand
for new sources of power, such as wind and thermal, declined with
the overall economic conditions. Segment profit increased 2% in
2010 and 9% in 2009 primarily on higher prices and lower material
and other costs. We continue to invest in market-leading technol-
ogy and services at Energy and Oil & Gas.
Technology Infrastructure (24% and 33% of consolidated
three-year revenues and total segment profit, respectively) rev-
enues and segment profit fell 2% and 7%, respectively, in 2010
and 7% and 9%, respectively, in 2009. We continue to invest in
market-leading technologies and services at Aviation, Healthcare
and Transportation. Aviation revenues and earnings trended
down over this period on lower equipment sales and services and
the costs of investment in new product launches, coupled with
the effects of the challenging global economic environment.
Healthcare revenues and earnings improved in 2010 on higher
equipment sales and services after trending down in 2009 due
to generally weak global economic conditions and uncertainty in
the healthcare markets. Transportation revenues and earnings
declined 12% and 33%, respectively, in 2010, and 24% and 51%,
respectively, in 2009 as the weakened economy has driven
overall reductions in U.S. freight traffic and we updated our esti-
mates of long-term product service costs in our maintenance
service agreements.