Elaine Yi's List: 10-K-2007

• PLAYSKOOL, TRANSFORMERS, MY LITTLE PONY,  LITTLEST PET SHOP, TONKA, SUPER SOAKER, MILTON BRADLEY, PARKER  BROTHERS, TIGER and WIZARDS OF THE COAST
• Organizationally, our principal segments are North America and  International
• In the North  American segment, our products are organized into the following  categories: (i) games and puzzles; (ii) boys’  toys; (iii) girls’ toys; (iv) preschool toys;  (v) tween toys; and (vi) other.
• Our games and puzzles category includes several well known  brands, including MILTON BRADLEY, PARKER BROTHERS, TIGER GAMES,  AVALON HILL and WIZARDS OF THE COAST.
• Core game brands include MONOPOLY, BATTLESHIP, GAME  OF LIFE, SCRABBLE, CHUTES AND LADDERS, CANDY LAND, TROUBLE,  MOUSETRAP, OPERATION, HUNGRY HUNGRY HIPPOS, CONNECT FOUR,  TWISTER, YAHTZEE, JENGA, SIMON, CLUE, SORRY!, RISK, BOGGLE and  TRIVIAL PURSUIT, as well as a line of jigsaw puzzles for  children and adults, including BIG BEN and CROXLEY, as well as  the PUZZ-3D line.
• Our boys’ toys include a wide range of core brands such as  G.I. JOE and TRANSFORMERS action figures and accessories as well  as entertainment-based licensed products based on popular movie  and television characters, such as STAR WARS and MARVEL toys and  accessories.
• In 2007, sales in our boys’ toys category  benefited from major motion picture releases of SPIDER-MAN 3 in  May of 2007 and TRANSFORMERS in July of 2007. In 2008,  SPIDER-MAN and TRANSFORMERS products are expected to be  supported by animated television series.
• In addition, we will be introducing  products based on the expected major motion picture releases of  IRONMAN and HULK, two properties available under our MARVEL  license, and INDIANA JONES
• PLAYSKOOL trademark
• Our tweens toys category generally markets products under the  TIGER ELECTRONICS and NERF brands and seeks to target those  children who have outgrown traditional toys. The age group  targeted by this category is generally 8 to 12 years old
• In addition to our business in the United States, Mexico and  Canada, in 2007 we operated in more than 20 other countries,
• The  major geographic regions included in the International segment  are Europe, Asia Pacific and Latin and South America.
• The Company owns and operates manufacturing facilities in East  Longmeadow, Massachusetts and Waterford, Ireland. Sourcing of  our other production is done through unrelated manufacturers in  various Far East countries, principally China, using a Hong Kong  based wholly-owned subsidiary operation for quality control and  order coordination purposes.
• During 2007, sales to our three largest customers,  Wal-Mart Stores, Inc., Target Corporation and Toys “R”  Us, Inc., represented 24%, 12% and 11%, respectively, of  consolidated net revenues, and sales to our top five customers,  including  Wal-Mart,  Target and Toys “R” Us, Inc., accounted for  approximately 52% of our consolidated net revenues. In the North  American segment, approximately 70% of the net revenues of the  segment were derived from our top three customers.
• In 2007 we spent $434,742 on advertising, promotion and  marketing programs compared to $368,996 in 2006 and $366,371 in  2005.
• In addition to contending with competition from other toy and  game companies, in our business we must deal with the phenomena  that many children have been moving away from traditional toys  and games at a younger age. We refer to this as “children  getting older younger.” As a result, our products not only  compete with the offerings of other toy and game manufacturers,  but we must compete, particularly in meeting the demands of  older children, with the entertainment offerings of many other  companies, such as makers of video games and consumer electronic  products
• At December 30, 2007, we employed approximately  5,900 persons worldwide, approximately 3,300 of whom were  located in the United States
• The family entertainment business is a fashion industry. Our  success is critically dependent upon the consumer appeal of our  products, principally games and toys. Our failure to  successfully anticipate, identify and react to children’s  interests and the current preferences in family entertainment  could significantly lower sales of our products and harm our  sales and profitability.
• In our industry, it is important to  identify and offer what are considered to be the “hot”  toys and games on children’s “wish lists”.
• Factors that could negatively affect our business  include a potential significant revaluation of the Chinese yuan,  which may result in an increase in the cost of producing  products in China, increases in labor costs and difficulties in  moving products manufactured in the Far East out of the Far East  and through the ports on the western coast of  North America, whether due to port congestion, labor  disputes, product regulations and/or inspections or other  factors.
• Part  of our strategy for remaining relevant to older children is to  offer innovative children’s toy and game electronic  products. The margins on many of these products are lower than  more traditional toys and games and such products may have a  shorter lifespan than more traditional toys and games. As a  result, increasing sales of children’s toy and game  electronic products may lower our overall operating margins and  produce more volatility in our business.
• Our costs for designing, developing and producing electronic  products tend to be higher than for many of our other more  traditional products, such as board games and action figures.  The ability to recoup these higher costs through sufficient  sales quantities and to reflect higher costs in higher prices is  constrained by heavy competition in consumer electronics.
• December 30, 2007,  the Company’s ratings from Moody’s Investor Services,  Inc., Standard & Poor’s Ratings Services and  Fitch Ratings were BBB, Baa2 and BBB, respectively.

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• Kellogg Company, founded in 1906  and incorporated in Delaware in 1922, and its subsidiaries are  engaged in the manufacture and marketing of ready-to-eat cereal  and convenience foods.
• Our principal products are  ready-to-eat cereals and convenience foods, such as cookies,  crackers, toaster pastries, cereal bars, fruit snacks, frozen  waffles and veggie foods.
• manufactured by us in 18 countries  and marketed in more than 180 countries.
• We also market cookies, crackers, and other convenience foods,  under brands such as Kellogg’s, Keebler, Cheez-It,  Murray, Austin and Famous Amos, to  supermarkets in the United States through a direct store-door  (DSD) delivery system, although other distribution methods are  also used.
• The principal ingredients in the products produced by us in the  United States include corn grits, wheat and wheat derivatives,  oats, rice, cocoa and chocolate, soybeans and soybean  derivatives, various fruits, sweeteners, flour, vegetable oils,  dairy products, eggs, and other filling ingredients
• We enter into long-term contracts for the commodities described  in this section and purchase these items on the open market,  depending on our view of possible price fluctuations, supply  levels, and our relative negotiating power
• we also use commodity  futures and options to hedge some of our costs.
• Natural gas and propane are the primary sources of energy used  to power processing ovens at major domestic and international  facilities, although certain locations may use oil or propane on  a back-up or  alternative basis. In addition, considerable amounts of diesel  fuel are used in connection with the distribution of our  products.
• These trademarks include Kellogg’s  for cereals, convenience foods and our other products,  and the brand names of certain ready-to-eat cereals, including  All-Bran, Apple Jacks, Bran Buds, Complete Bran  Flakes, Complete Wheat Flakes, Cocoa  Krispies, Cinnamon Crunch Crispix, Corn Pops, Cruncheroos,  Kellogg’s Corn Flakes, Cracklin’ Oat Bran, Crispix,
• Froot Loops, Kellogg’s Frosted Flakes, Frosted  Mini-Wheats,  Frosted Krispies, Just Right, Kellogg’s Low Fat  Granola, Mueslix, Nutri-Grain, Pops, Product 19,  Kellogg’s Raisin Bran, Rice Krispies, Raisin Bran Crunch,  Smacks/Honey Smacks, Smart Start, Special K and  Special K Red Berries in the United States and  elsewhere; Zucaritas, Choco Zucaritas, Crusli Sucrilhos,  Sucrilhos Chocolate, Sucrilhos Banana,  Vector, Musli, NutriDia, and Choco Krispis  for cereals in Latin America; Vive and  Vector in Canada; Choco Pops, Chocos,  Frosties, Muslix, Fruit ’n’ Fibre, Kellogg’s  Crunchy Nut Corn Flakes, Kellogg’s Crunchy Nut Red Corn  Flakes, Honey Loops, Kellogg’s Extra, Sustain, Muslix,  Country Store, Ricicles, Smacks, Start, Smacks Choco Tresor,  Pops, and Optima for cereals in Europe;  and Cerola, Sultana Bran, Chex, Frosties, Goldies, Rice  Bubbles, Nutri-Grain, Kellogg’s Iron Man Food, and  BeBig for cereals in Asia and Australia.  Additional Company trademarks are the names of certain  combinations of ready-to-eat Kellogg’s  cereals, including Fun Pak, Jumbo, and  Variety.
• Other Company brand names include Kellogg’s  Corn Flake Crumbs; Croutettes for herb  season stuffing mix; All-Bran, Choco Krispis, Froot Loops,  NutriDia, Kuadri-Krispis, Zucaritas, Special K, and  Crusli for cereal bars, Keloketas  for cookies, Komplete for biscuits; and  Kaos for snacks in Mexico and elsewhere in Latin  America; Pop-Tarts Pastry Swirls for toaster  danish; Pop-Tarts and Pop-Tarts Snak-Stix  for toaster pastries; Eggo, Special K, Froot Loops  and Nutri-Grain for frozen waffles and  pancakes; Rice Krispies Treats for baked snacks  and convenience foods; Special K2O flavored water  and flavored protein water mixes; Nutri-Grain  cereal bars, Nutri-Grain yogurt bars,  All-Bran  bars and crackers, Smart Start bars and  Kellogg’s Crunch bars for convenience foods  in the United States and elsewhere; K-Time, Rice Bubbles,  Day Dawn, Be Natural, Sunibrite and LCMs  for convenience foods in Asia and Australia;  Nutri-Grain Squares, Nutri-Grain  Elevenses, and Rice Krispies Squares for  convenience foods in Europe; Fruit Winders for  fruit snacks in the United Kingdom; Kashi and  GoLean for certain cereals, nutrition bars, and  mixes; TLC for crackers; Special K  and Vector for meal replacement products;  and Morningstar Farms, Loma Linda, Natural Touch,  and Worthington for certain meat and egg  alternatives.
• We consider that, taken as a whole, the rights under our various  patents, which expire from time to time, are a valuable asset,  but we do not believe that our businesses are materially  dependent on any single patent or group of related patents. Our  activities under licenses or other franchises or concessions  which we hold are similarly a valuable asset, but are not  believed to be material.
• Working  Capital. Although terms vary around the  world and by business types, in the United States we generally  have required payment for goods sold eleven or sixteen days  subsequent to the date of invoice as 2% 10/net 11 or 1%  15/net 16. Receipts from goods sold, supplemented as  required by borrowings, provide for our payment of dividends,  capital expansion, and for other operating expenses and working  capital needs.
• Our  largest customer, Wal-Mart Stores, Inc. and its affiliates,  accounted for approximately 19% of consolidated net sales during  2007,
• During 2007, our top five customers, collectively,  accounted for approximately 32% of our consolidated net sales  and approximately 40% of U.S. net sales.
• Our products have been  generally sold through our own sales forces and through broker  and distributor arrangements, and have been generally resold to  consumers in retail stores, restaurants, and other food service  establishments.
• For  the most part, orders are filled within a few days of receipt  and are subject to cancellation at any time prior to shipmen
• Our expenditures for research and  development were approximately $179 million in 2007,  $191 million in 2006 and $181 million in 2005.
• Employees. At  December 29, 2007, we had approximately  26,500 employees.
• We have a substantial amount of indebtedness. 

    

    

    

    We have indebtedness that is substantial in relation to our  shareholders’ equity. As of December 29, 2007, we had  total debt of approximately $5.23 billion and  shareholders’ equity of $2.53 billion.

  • Why? How come so much debt? why did not paid down debt, it seems K generates lots of cash.
• We sponsor a number of defined benefit  plans for employees in the United States and various foreign  locations, including pension, retiree health and welfare, active  health care, severance and other postemployment benefits. We  also participate in a number of multiemployer pension plans for  certain of our manufacturing locations. Our major pension plans  and U.S. retiree health and welfare plans are funded with  trust assets invested in a globally diversified portfolio of  equity securities with smaller holdings of bonds, real estate  and other investments.
• Our largest customer, Wal-Mart Stores, Inc. and its affiliates,  accounted for approximately 19% of consolidated net sales during  2007, comprised principally of sales within the United States.  At December 29, 2007, approximately 13% of our consolidated  receivables balance and 21% of our U.S. receivables balance  was comprised of amounts owed by Wal-Mart Stores, Inc. and its  affiliates. During 2007, our top five customers, collectively,  accounted for approximately 32% of our consolidated net sales  and approximately 40% of U.S. net sales.
• As the retail  grocery trade continues to consolidate and mass marketers become  larger, our large retail customers may seek to use their  position to improve their profitability through improved  efficiency, lower pricing and increased promotional programs.
• Our cash  conversion cycle (defined as days of inventory and trade  receivables outstanding less days of trade payables outstanding)  is relatively short; equating to approximately 27 days  for the trailing  365-day  period ended December 29, 2007,
• For 2007, our Board of Directors authorized stock repurchases  for general corporate purposes and to offset issuances for  employee benefit programs of up to $650 million, which we  spent to repurchase approximately 12 million shares.  Pursuant to similar Board authorizations applicable to those  years, we paid $650 million in 2006 to repurchase  approximately 15 million shares, and $664 million in  2005 to repurchase approximately 16 million shares. The  2006 activity consisted principally of a February 2006 private  transaction with the W. K. Kellogg Foundation Trust (“the  Trust”) to repurchase approximately 13 million shares  for $550 million. The 2005 activity consisted principally  of a November 2005 private transaction with the Trust to  repurchase approximately 9 million shares for  $400 million. For 2008, our Board of Directors has  authorized a stock repurchase program of up to $650 million.
• At December 29, 2007, our total debt was approximately  $5.2 billion, approximately even with the balance at  year-end 2006. During 2006, we reduced the Company’s common  stock outstanding through repurchase programs by approximately  4%, and implemented a mid-year increase in the shareholder  dividend level of approximately 5%. Similarly, during 2007, we  further reduced our common stock outstanding through repurchase  programs by approximately 3% and implemented a mid-year increase  in the shareholder dividend level of approximately 6.5%.  Primarily due to the prioritization of these uses of cash flow,  the aforementioned need to selectively invest in production  capacity, as well as pursue selective acquisition opportunities,  we did not reduce our total debt balance during the past two  years, but remain committed to net debt reduction (total debt  less cash) over the long term. We currently expect the total  debt balance at year-end 2008 to be slightly higher than the  2007 year-end level.

  • serious concern regarding management compensation alignment. Was it management pay alignement to the share price? How much was stock option etc.
• we currently expect our internal net  sales could increase at a mid-single digit rate,

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• is a diversified worldwide entertainment company with operations in four business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products.
• The Company operates the ABC Television Network, which as of September 27, 2008, had affiliation agreements with 233 local stations reaching 99% of all U.S. television households
• The ABC Television Network derives substantially all of its revenues from the sale to advertisers of time in network programs for commercial announcements. The ability to sell time for commercial announcements and the rates received are primarily dependent on the size and nature of the audience that the network can deliver to the advertiser as well as overall advertiser demand for time on network broadcasts. The ABC Television Network also operates ABC.com and ABCNews.com which are discussed in more detail under Internet and Mobile operations.
• The Company produces and distributes live action and animated television programming under the ABC Studios, Buena Vista Productions, and ABC Family Productions labels. These entities are collectively referred to as the Production Companies.
• The Company distributes its productions both domestically and internationally through distribution companies which are Disney-ABC Domestic Television and Disney-ABC ESPN Television International. The Company’s productions are also distributed in DVD format and online.
• The two primary brands for our cable networks are ESPN and Disney Channel. In addition to cable network operations, we have ESPN and Disney Channel branded radio operations which are managed together with the cable operations.
• Cable networks derive a majority of their revenues from fees charged to cable, satellite and telecommunications service providers (Cable Service Providers) and, for certain networks, the sale to advertisers of time in network programs for commercial announcements.
• Club Penguin, an online virtual world designed for kids ages 6-14, features animated penguin avatars that inhabit a snow-covered world, converse with other users, participate in group activities and create and furnish a virtual home with currency earned inside the game.
• The ABC Television Network, Disney Channel, ESPN, ABC Family Channel and the ESPN and Radio Disney networks and our other broadcast and cable networks compete for viewers primarily with other television and cable networks, independent television stations and other media, such as DVDs, video games and the internet
• The Company’s contractual agreements with Cable Service Providers are renewed or renegotiated from time to time in the ordinary course of business.
• The Company owns and operates the Walt Disney World Resort in Florida, the Disneyland Resort in California, the Disney Vacation Club, the Disney Cruise Line, Adventures by Disney, and ESPN Zone. The Company manages and has effective ownership interests of 51% and 43%, respectively, in Disneyland Resort Paris and Hong Kong Disneyland Resort. The Company also licenses the operations of the Tokyo Disney Resort in Japan. The Company’s Walt Disney Imagineering unit designs and develops new theme park concepts and attractions as well as resort properties.
• As of September 27, 2008, under the banners Walt Disney Pictures, Pixar, Touchstone Pictures, Hollywood Pictures, Miramax and Dimension, 1,407 produced and acquired titles, including 1,139 live-action titles and 268 cartoon shorts and animated features, are available to the domestic home entertainment marketplace and 3,309 produced and acquired titles, including 2,456 live-action titles and 853 cartoon shorts and animated features, are available to the international home entertainment market.
• With more than 150,000 employees, our profitability is substantially affected by costs of pension benefits and current and postretirement medical benefits. We may experience significant increases in these costs as a result of macro-economic factors, which are beyond our control, including increases in the cost of health care
• In addition, changes in investment returns and discount rates used to calculate pension expense and related assets and liabilities can be volatile and may have an unfavorable impact on our costs in some years.

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• Union Pacific Corporation owns one of America’s leading transportation companies. Its principal operating company, Union Pacific Railroad Company, links 23 states in the western two-thirds of the country and serves the fastest-growing U.S. population centers
• Union Pacific Railroad Company’s diversified business mix includes agricultural products, automotive, chemicals, energy, industrial products, and intermodal.
• Union Pacific Railroad Company connects with Canada’s rail systems and is the only railroad serving all six major gateways to Mexico, making it North America’s premier rail franchise.
• We have 32,205 route miles, linking Pacific Coast and Gulf Coast ports with the Midwest and eastern United States gateways and providing several corridors to key Mexican gateways.
• Our freight traffic consists of bulk, manifest, and premium business. Bulk traffic is primarily coal, grain, rock, or soda ash in unit trains – trains transporting a single commodity from one source to one destination. Manifest traffic is individual carload or less than train-load business, including commodities such as lumber, steel, paper, and food. The transportation of finished vehicles and intermodal containers is part of our premium business. In 2007, we generated commodity revenue totaling $15.5 billion from the following six commodity groups:
• Agricultural – Transporting agricultural products, including whole grains, commodities produced from these grains, and food and beverage products, provided 17% of our 2007 commodity revenue.
• We also serve significant domestic markets, including grain processors, animal feeders, and ethanol producers in the Midwest, West, South, and Rocky Mountain states. Primary food commodities consist of a variety of fresh and frozen fruits and vegetables, dairy products, and beverages, which are moved to major U.S. population centers for consumption.
• Express Lane and our Produce Unit Train, our premium perishables services that move fruits and vegetables from the PNW and California with priority service to destinations in the East, compete with the trucking industry. We transport frozen meat and poultry to the West Coast ports for export, while beverages, primarily beer, enter the U.S. from Mexico.
• Automotive – We are the largest automotive carrier west of the Mississippi River, serving seven vehicle assembly plants and distributing imported vehicles from six West Coast ports and Houston.
• In 2007, transportation of finished vehicles and automotive materials accounted for 9% of our commodity revenue.
• Soda ash shipments originate in southwestern Wyoming and California destined primarily for glass producing markets in the East, the West, and abroad.
• Fertilizer movements originate primarily in the Gulf Coast region, as well as the West and Canada, bound for major agricultural users in the Midwest and the western U.S.
• Energy – Coal transportation accounted for 20% of our 2007 commodity revenue.
• Intermodal – Our intermodal business, which represented 19% of our 2007 commodity revenue, includes international, domestic, and premium shipments. International business consists of imported container traffic that arrives at West Coast ports via steamship for destinations throughout the United States. Domestic business includes domestic container and trailer traffic for intermodal marketing companies (primarily shipper agents and consolidators) and truckload carriers. Less-than-truckload and package carriers with time-sensitive business requirements account for the majority of our premium service.
• Competition – We are subject to competition from other railroads, motor carriers, ship and barge operators, and pipelines. Our main rail competitor is Burlington Northern Santa Fe Corporation. Its rail subsidiary, BNSF Railway Company (BNSF), operates parallel routes in many of our main traffic corridors.
• In addition, we operate in corridors served by other railroads and motor carriers. Motor carrier competition is particularly strong for five of our six commodity groups (excluding energy). Because of the proximity of our routes to major inland and Gulf Coast waterways, barge competition can be particularly effective, especially for grain and bulk commodities. In addition to price competition, we face competition with respect to transit times and quality and reliability of service. While we must build or acquire and maintain our rail system, trucks and
• Employees – Approximately 86% of our 50,089 full-time-equivalent employees are represented by 14 major rail unions.
• We May Be Affected by General Economic Conditions – Prolonged negative changes in domestic and global economic conditions affecting the producers and consumers of the commodities we carry may have a material adverse effect on our results of operations, financial condition, and liquidity.
• Changes in demographics, training requirements, and the availability of qualified personnel could negatively affect our ability to meet demand for rail service.

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• Construction  Products— The  Construction Products sector represented approximately 33 percent of total Industrial  Products revenues in 2007
• Based on weekly reporting by the Association of American Railroads, BNSF’s share of the western United States rail traffic in 2007 was approximately 49 percent
• BNSF Railway’s primary rail competitor in the Western region of the United States is the Union Pacific Railroad Company.
• Depending on the specific market, deregulated motor carriers, other railroads and river barges may exert pressure on price and service levels. The presence of advanced, high service truck lines with expedited delivery, subsidized infrastructure and minimal empty mileage continues to affect the market for non-bulk, time-sensitive freight. The potential expansion of longer combination vehicles could further encroach upon markets traditionally served by railroads.
• Railroad Retirement

   

  Railroad industry personnel are covered by the Railroad Retirement System instead of Social Security. BNSF Railway’s contributions under the Railroad Retirement System have been almost triple those in industries covered by Social Security. The Railroad Retirement System, funded primarily by payroll taxes on covered employers and employees, includes a benefit roughly equivalent to Social Security (Tier I), an additional benefit similar to that allowed in some private defined-benefit plans (Tier II) and other benefits. For 2007, the Railroad Retirement System required up to a 19.75 percent contribution by railroad employers on eligible wages, while the Social Security and Medicare Acts only required a 7.65 percent contribution on similar wage bases.

  • could this be a time bomb when baby boomers retire in horde?
• The transportation of Agricultural Products provided approximately 18 percent of 2007 freight revenues.
• BNSF is one of the largest transporters of low-sulfur coal in the United States. More than 90 percent of all BNSF’s coal tons originated from the Powder River Basin of Wyoming and Montana
• In 2007, the transportation of coal contributed about 21 percent of freight revenues.
• Food  and Beverages— Food  and Beverages represented approximately 8 percent of total 2007 Industrial  Products revenues.
• Chemicals  and Plastic Products—  The Chemicals and Plastic Products sector represented approximately  14 percent of total 2007 Industrial  Products revenues. This group is composed of industrial chemicals and  plastics commodities.
• Petroleum  Products— Commodities  included in the Petroleum Products sector are liquefied petroleum gas  (LPG), diesel fuels, asphalt, alcohol, solvents, petroleum coke, lubes,  oils, waxes and carbon black. This group made up 16 percent of total Industrial  Products revenues for 2007.
• On December 30, 1996, BNI merged with and into SFP.
• Burlington Northern Santa Fe Corporation (BNSF, Registrant or Company) was incorporated in the State of Delaware on December 16, 1994. On September 22, 1995, the shareholders of Burlington Northern Inc. (BNI) and Santa Fe Pacific Corporation (SFP) became the shareholders of BNSF pursuant to a business combination of the two companies.
• BNSF is engaged primarily in the freight rail transportation business
• n serving the Midwest, Pacific Northwest and the Western, Southwestern and Southeastern regions and ports of the country, BNSF transports, through one operating transportation services segment, a range of products and commodities derived from manufacturing, agricultural and natural resource industries
• Depending on the specific market, the Company faces intermodal, intramodal, product and geographic competition
• A downturn in the economy or change in government policy could negatively impact demand for the Company’s services.

   

   

  Significant, extended negative changes in economic conditions that impact the producers and consumers of the commodities transported by the Company may have an adverse effect on the Company’s operating results, financial condition or liquidity. In addition, changes in United States and foreign government policies could change the economic environment and affect demand for the Company’s services. For example, changes in clean air laws or regulation of carbon dioxide emissions could reduce the demand for coal. Also, United States and foreign government agriculture tariffs or subsidies could affect the demand for grain.
• For example, the Company believes that high service truck lines, due to their ability to deliver non-bulk products on an expedited basis, have had and will continue to have an adverse effect on the Company’s ability to compete for deliveries of non-bulk, time-sensitive freight. While the Company must build or acquire and maintain its rail system, trucks and barges are able to use public rights-of-way maintained by public entities. Any material increase in the capacity and quality of these alternative methods or the passage of legislation granting greater latitude to motor carriers with respect to size and weight restrictions could have an adverse effect on the Company’s results of operations, financial condition or liquidity. In addition, a failure to provide the level of service required by the Company’s customers could result in loss of business to competitors.
• As part of its railroad operations, the Company frequently transports chemicals and other hazardous materials.

   

   

  The Company is required to transport these commodities to the extent of its common carrier obligation
• Building  Products— This sector  generated approximately 29 percent of total 2007 Industrial Products  revenues
• Most of the Company’s employees are represented by unions, and failure to successfully negotiate collective bargaining agreements may result in strikes, work stoppages, or substantially higher ongoing labor costs.
• The Industrial Products’ freight business provided approximately 24 percent of BNSF’s freight revenues in 2007
• The Consumer Products’ freight business provided approximately 37 percent of freight revenues in 2007
• The Company’s success is dependent on its ability to operate its railroad system efficiently.
• BNSF Railway operates over a railroad system consisting of approximately 32,000 route miles of track, excluding multiple main tracks, yard tracks and sidings, approximately 23,000 miles of which are owned route miles, including easements, in 28 states and two Canadian provinces as of December 31, 2007. Approximately 9,000 route miles of BNSF Railway’s system consist of trackage rights that permit BNSF Railway to operate its trains with its crews over other railroads’ tracks.
• At December 31, 2007, BNSF and its subsidiaries had approximately 40,000 employees. The rail operations of BNSF Railway, BNSF’s principal operating subsidiary, comprise one of the largest railroad systems in North America.
• Changes to or limits on carbon dioxide emissions could result in significant capital expenditures to comply with these regulations.
• Demand for Powder River Basin coal has increased substantially over the past 20 years due to its relatively low sulfur content, abundant reserves, relatively inexpensive mine production and competitive delivered cost to power plants.

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• We are one of the largest and most diversified technology, media, and financial services corporations in the world
• With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, we serve customers in more than 100 countries and employ more than 300,000 people worldwide.
• Industrial (10.3%, 11.7% and 12.5% of consolidated revenues in 2007, 2006 and 2005, respectively) produces and sells products including consumer appliances, industrial equipment and related services.
• Operating businesses that are reported as segments include Infrastructure, Commercial Finance, GE Money, Healthcare, NBC Universal and Industrial.
• Infrastructure (33.5%, 30.9% and 30.5% of consolidated revenues in 2007, 2006 and 2005, respectively) is one of the world’s leading providers of essential technologies to developed, developing and emerging countries.
• Our consolidated global revenues increased to $86.5 billion in 2007, compared with $70.8 billion in 2006 and $60.9 billion in 2005.
• Healthcare (9.8%, 10.9% and 11.0% of consolidated revenues in 2007, 2006 and 2005, respectively) has expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies.
• GE Money (14.5%, 13.0% and 12.5% of consolidated revenues in 2007, 2006 and 2005, respectively) is a leading provider of financial services to consumers and retailers in over 50 countries around the world.
• Commercial Finance (19.8%, 20.3% and 20.0% of consolidated revenues in 2007, 2006 and 2005, respectively) offers a broad range of financial services worldwide.
• NBC Universal (8.9%, 10.7% and 10.8% of consolidated revenues in 2007, 2006 and 2005, respectively) is one of the world’s leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience.
• Infrastructure also provides aviation financing as well as energy and water investing, lending and leasing.

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