Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2006
 
OR
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____
 
Commission file number 1-35
 
GENERAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)

 
New York
  
14-0689340
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
 
    
3135 Easton Turnpike, Fairfield, CT
  
06828-0001
(Address of principal executive offices)
  
(Zip Code)
 
(Registrant’s telephone number, including area code) (203) 373-2211
 
_______________________________________________
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
 
There were 10,323,359,000 shares of common stock with a par value of $0.06 per share outstanding at June 30, 2006.
 



(1)



General Electric Company
 
Part I - Financial Information
  
Page
   
 
Item 1. Financial Statements
    
Condensed Statement of Earnings
    
 
3
 
4
 
5
 
6
 
7
 
8
 
21
 
34
     
Part II - Other Information
    
     
 
34
 
34
 
35
 
36
 
37
 
Forward-Looking Statements
 
This document contains “forward-looking statements” - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; unanticipated loss development in our insurance businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.


(2)



Part I. Financial Information
 
Item 1. Financial Statements
 
Condensed Statement of Earnings
General Electric Company and consolidated affiliates
 
 
Three months ended June 30 (Unaudited)
  
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
2006
  
2005
  
2006
  
2005
  
2006
  
2005
  
                                     
Sales of goods
$
16,524
  
$
14,749
  
$
15,993
  
$
14,101
  
$
712
  
$
664
  
Sales of services
  
8,373
    
8,240
    
8,455
    
8,307
    
-
    
-
  
Other income
  
657
    
596
    
695
    
624
    
-
    
-
  
GECS earnings from continuing operations
  
-
    
-
    
2,500
    
2,028
    
-
    
-
  
GECS revenues from services
 
14,346
    
12,954
    
-
    
-
    
14,595
    
13,297
  
Total revenues
  
39,900
    
36,539
    
27,643
    
25,060
    
15,307
    
13,961
  
                                     
Cost of goods sold
  
12,827
    
11,425
    
12,350
    
10,812
    
659
    
628
  
Cost of services sold
  
5,316
    
5,171
    
5,397
    
5,238
    
-
    
-
  
Interest and other financial charges
  
4,533
    
3,786
    
486
    
336
    
4,202
    
3,603
  
Investment contracts, insurance losses and
                                    
insurance annuity benefits
  
793
    
799
    
-
    
-
    
831
    
850
  
Provision for losses on financing receivables
  
896
    
958
    
-
    
-
    
896
    
958
  
Other costs and expenses
  
9,406
    
8,741
    
3,647
    
3,266
    
5,853
    
5,643
  
Minority interest in net earnings of
                                   
consolidated affiliates
 
235
    
290
    
186
    
249
    
49
    
41
  
Total costs and expenses
  
34,006
    
31,170
    
22,066
    
19,901
    
12,490
    
11,723
  
                                     
Earnings from continuing operations
                                    
before income taxes
  
5,894
    
5,369
    
5,577
    
5,159
    
2,817
    
2,238
  
Provision for income taxes
  
(1,040
)
  
(993
)
  
(723
)
  
(783
)
  
(317
)
  
(210
)
Earnings from continuing operations
  
4,854
    
4,376
    
4,854
    
4,376
    
2,500
    
2,028
  
Earnings (loss) from discontinued operations,
                                    
net of taxes
  
(2
)
  
271
    
(2
)
  
271
    
(2
)
  
271
  
Net earnings
$
4,852
  
$
4,647
  
$
4,852
  
$
4,647
  
$
2,498
  
$
2,299
  
                                     
Per-share amounts
                                   
Per-share amounts - earnings from
                                    
continuing operations
                                    
Diluted earnings per share
$
0.47
  
$
0.41
                          
Basic earnings per share
$
0.47
  
$
0.41
                          
                                     
Per-share amounts - net earnings
                                   
Diluted earnings per share
$
0.47
  
$
0.44
                          
Basic earnings per share
$
0.47
  
$
0.44
                          
                                     
Dividends declared per share
$
0.25
  
$
0.22
                          

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.
 

(3)

Condensed Statement of Earnings
General Electric Company and consolidated affiliates
 
 
Six months ended June 30 (Unaudited)
  
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
2006
  
2005
  
2006
  
2005
  
2006
  
2005
  
                                     
Sales of goods
$
31,059
  
$
28,405
  
$
30,019
  
$
27,089
  
$
1,267
  
$
1,338
  
Sales of services
  
17,322
    
15,989
    
17,515
    
16,152
    
-
    
-
  
Other income
  
1,108
    
913
    
1,174
    
954
    
-
    
-
  
GECS earnings from continuing operations
  
-
    
-
    
4,770
    
3,891
    
-
    
-
  
GECS revenues from services
 
28,232
    
25,582
    
-
    
-
    
28,721
    
26,228
  
Total revenues
  
77,721
    
70,889
    
53,478
    
48,086
    
29,988
    
27,566
  
                                     
Cost of goods sold
  
24,483
    
22,031
    
23,538
    
20,789
    
1,172
    
1,263
  
Cost of services sold
  
11,321
    
10,107
    
11,514
    
10,270
    
-
    
-
  
Interest and other financial charges
  
8,894
    
7,457
    
870
    
717
    
8,309
    
7,017
  
Investment contracts, insurance losses and
                                    
insurance annuity benefits
  
1,542
    
1,626
    
-
    
-
    
1,636
    
1,716
  
Provision for losses on financing receivables
  
1,718
    
1,860
    
-
    
-
    
1,718
    
1,860
  
Other costs and expenses
  
18,443
    
17,589
    
7,043
    
6,577
    
11,576
    
11,333
  
Minority interest in net earnings of
                                   
consolidated affiliates
 
473
    
506
    
349
    
435
    
124
    
71
  
Total costs and expenses
  
66,874
    
61,176
    
43,314
    
38,788
    
24,535
    
23,260
  
                                     
Earnings from continuing operations
                                    
before income taxes
  
10,847
    
9,713
    
10,164
    
9,298
    
5,453
    
4,306
  
Provision for income taxes
  
(1,951
)
  
(1,777
)
  
(1,268
)
  
(1,362
)
  
(683
)
  
(415
)
Earnings from continuing operations
  
8,896
    
7,936
    
8,896
    
7,936
    
4,770
    
3,891
  
Earnings from discontinued operations, net of taxes
  
261
    
676
    
261
    
676
    
261
    
676
  
Net earnings
$
9,157
  
$
8,612
  
$
9,157
  
$
8,612
  
$
5,031
  
$
4,567
  
                                     
Per-share amounts
                                   
Per-share amounts - earnings from
                                    
continuing operations
                                    
Diluted earnings per share
$
0.85
  
$
0.75
                          
Basic earnings per share
$
0.86
  
$
0.75
                          
                                     
Per-share amounts - net earnings
                                   
Diluted earnings per share
$
0.88
  
$
0.81
                          
Basic earnings per share
$
0.88
  
$
0.81
                          
                                     
Dividends declared per share
$
0.50
  
$
0.44
                          

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

(4)

Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
 
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions; except share amounts)
6/30/06
  
12/31/05
  
6/30/06
  
12/31/05
  
6/30/06
  
12/31/05
  
                                     
Cash and equivalents
$
11,099
  
$
8,825
  
$
1,766
  
$
2,015
  
$
9,484
  
$
7,130
  
Investment securities
  
45,021
    
42,148
    
469
    
461
    
44,559
    
41,710
  
Current receivables
  
12,043
    
14,851
    
12,255
    
15,058
    
-
    
-
  
Inventories
  
11,744
    
10,474
    
11,579
    
10,315
    
165
    
159
  
Financing receivables - net
  
303,899
    
287,639
    
-
    
-
    
303,899
    
287,639
  
Other GECS receivables
  
15,732
    
14,332
    
-
    
-
    
20,282
    
18,625
  
Property, plant and equipment (including
                                    
equipment leased to others) - net
  
71,005
    
67,528
    
16,724
    
16,504
    
54,281
    
51,024
  
Investment in GECS
  
-
    
-
    
48,589
    
50,815
    
-
    
-
  
Intangible assets - net
  
85,583
    
81,630
    
60,719
    
57,839
    
24,864
    
23,791
  
All other assets
  
91,199
    
84,849
    
36,641
    
36,752
    
55,680
    
49,461
  
Assets of discontinued operations
  
15,090
    
61,066
    
-
    
-
    
15,090
    
61,066
  
Total assets
$
662,415
  
$
673,342
  
$
188,742
  
$
189,759
  
$
528,304
  
$
540,605
  
                                     
Short-term borrowings
$
157,449
  
$
158,156
  
$
1,517
  
$
1,127
  
$
156,327
  
$
157,672
  
Accounts payable, principally trade accounts
  
19,315
    
21,183
    
10,577
    
11,870
    
12,717
    
13,043
  
Progress collections and price adjustments accrued
  
4,708
    
4,456
    
4,708
    
4,456
    
-
    
-
  
Other GE current liabilities
  
21,020
    
21,042
    
21,020
    
21,059
    
-
    
-
  
Long-term borrowings
  
236,935
    
212,281
    
9,090
    
9,081
    
229,033
    
204,397
  
Investment contracts, insurance liabilities
                                    
and insurance annuity benefits
  
34,491
    
33,097
    
-
    
-
    
34,872
    
33,387
  
All other liabilities
  
40,910
    
39,966
    
23,328
    
23,273
    
17,679
    
16,787
  
Deferred income taxes
  
15,583
    
16,226
    
3,750
    
3,733
    
11,833
    
12,493
  
Liabilities of discontinued operations
  
14,957
    
49,527
    
-
    
-
    
14,959
    
49,763
  
Total liabilities
  
545,368
    
555,934
    
73,990
    
74,599
    
477,420
    
487,542
  
                                     
Minority interest in equity of consolidated affiliates
  
8,274
    
8,054
    
5,979
    
5,806
    
2,295
    
2,248
  
Common stock (10,323,359,000 and 10,484,268,000
                                   
shares outstanding at June 30, 2006 and
                                    
December 31, 2005, respectively)
 
669
    
669
    
669
    
669
    
1
    
1
  
Accumulated gains (losses) - net
                                    
Investment securities
  
453
    
1,831
    
453
    
1,831
    
381
    
1,754
  
Currency translation adjustments
  
4,267
    
2,532
    
4,267
    
2,532
    
3,435
    
2,287
  
Cash flow hedges
  
(236
)
  
(822
)
  
(236
)
  
(822
)
  
(240
)
  
(813
)
Minimum pension liabilities
  
(917
)
  
(874
)
  
(917
)
  
(874
)
  
(192
)
  
(179
)
Other capital
  
25,482
    
25,227
    
25,482
    
25,227
    
12,524
    
12,386
  
Retained earnings
  
102,061
    
98,117
    
102,061
    
98,117
    
32,680
    
35,379
  
Less common stock held in treasury
  
(23,006
)
  
(17,326
)
  
(23,006
)
  
(17,326
)
  
-
    
-
  
                                     
Total shareowners’ equity
  
108,773
    
109,354
    
108,773
    
109,354
    
48,589
    
50,815
  
                                     
Total liabilities and equity
$
662,415
  
$
673,342
  
$
188,742
  
$
189,759
  
$
528,304
  
$
540,605
  

The sum of accumulated gains (losses) on investment securities, currency translation adjustments, cash flow hedges and minimum pension liabilities constitutes “Accumulated nonowner changes other than earnings,” and amounted to $3,567 million and $2,667 million at June 30, 2006, and December 31, 2005, respectively.
 
See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” June 30, 2006, data are unaudited. Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

(5)

Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
 
 
Six months ended June 30 (Unaudited)
  
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions)
2006
  
2005
  
2006
  
2005
  
2006
  
2005
  
     
   
    
   
    
   
    
   
    
   
      
Cash flows - operating activities
                                    
Net earnings
$
9,157
  
$
8,612
  
$
9,157
  
$
8,612
  
$
5,031
  
$
4,567
  
Earnings from discontinued operations
 
(261
)
  
(676
)
  
-
    
-
    
(261
)
  
(676
)
Adjustments to reconcile net earnings to cash
                                   
provided from operating activities
                                    
Depreciation and amortization of property,
                                    
plant and equipment
  
4,378
    
4,266
    
1,300
    
1,225
    
3,078
    
3,041
  
Earnings retained by GECS
  
-
    
-
    
2,559
    
(2,728
)
  
-
    
-
  
Deferred income taxes
  
401
    
(549
)
  
55
    
(87
)
  
346
    
(462
)
Decrease in GE current receivables
  
2,931
    
1,544
    
2,925
    
1,663
    
-
    
-
  
Increase in inventories
  
(1,467
)
  
(613
)
  
(1,461
)
  
(583
)
  
(6
)
  
(30
)
Decrease in accounts payable
  
(1,668
)
  
(1,401
)
  
(915
)
  
(1,228
)
  
(504
)
  
(71
)
Increase in GE progress collections
  
246
    
110
    
246
    
110
    
-
    
-
  
Provision for losses on GECS financing receivables
  
1,718
    
1,860
    
-
    
-
    
1,718
    
1,860
  
All other operating activities
  
(3,222
)
  
108
    
457
    
1,043
    
(620
)
  
(383
)
Cash from operating activities - continuing operations
  
12,213
    
13,261
    
14,323
    
8,027
    
8,782
    
7,846
  
Cash from (used for) operating activities - discontinued operations
  
(9
)
  
2,407
    
-
    
-
    
(9
)
  
2,407
  
Cash from operating activities
  
12,204
    
15,668
    
14,323
    
8,027
    
8,773
    
10,253
  
                                     
Cash flows - investing activities
                                    
Additions to property, plant and equipment
  
(7,384
)
  
(6,141
)
  
(1,497
)
  
(1,049
)
  
(5,887
)
  
(5,092
)
Dispositions of property, plant and equipment
  
2,930
    
3,071
    
-
    
-
    
2,896
    
3,075
  
Net decrease (increase) in GECS financing receivables
  
(15,483
)
  
4,249
    
-
    
-
    
(15,483
)
  
4,249
  
Payments for principal businesses purchased
  
(7,000
)
  
(10,341
)
  
(3,491
)
  
(3,499
)
  
(3,509
)
  
(6,842
)
Proceeds from sales of discontinued operations
 
8,112
    
3,403
    
-
    
-
    
8,112
    
3,403
  
All other investing activities
 
1,965
    
(1,263
)
  
1,403
    
687
    
(2,481
)
  
(2,584
)
Cash used for investing activities - continuing operations
  
(16,860
)
  
(7,022
)
  
(3,585
)
  
(3,861
)
  
(16,352
)
  
(3,791
)
Cash used for investing activities - discontinued operations
  
(2,558
)
  
(1,131
)
  
-
    
-
    
(2,558
)
  
(1,131
)
Cash used for investing activities
  
(19,418
)
  
(8,153
)
  
(3,585
)
  
(3,861
)
  
(18,910
)
  
(4,922
)
                                     
Cash flows - financing activities
                                    
Net increase (decrease) in borrowings (maturities of 90 days or less)
 
(3,312
)
  
(5,667
)
  
561
    
48
    
(4,127
)
  
(5,801
)
Newly issued debt (maturities longer than 90 days)
 
44,178
    
40,526
    
64
    
87
    
43,974
    
40,378
  
Repayments and other reductions (maturities longer than 90 days)
  
(21,935
)
  
(38,191
)
  
(148
)
  
(692
)
  
(21,787
)
  
(37,499
)
Net purchases of GE treasury shares
  
(6,217
)
  
(389
)
  
(6,217
)
  
(389
)
  
-
    
-
  
Dividends paid to shareowners
  
(5,247
)
  
(4,677
)
  
(5,247
)
  
(4,677
)
  
(7,590
)
  
(1,839
)
All other financing activities
  
(546
)
  
(860
)
  
-
    
-
    
(546
)
  
(860
)
Cash from (used for) financing activities - continuing operations
  
6,921
    
(9,258
)
  
(10,987
)
  
(5,623
)
  
9,924
    
(5,621
)
Cash used for financing activities - discontinued operations
  
(256
)
  
(691
)
  
-
    
-
    
(256
)
  
(691
)
Cash from (used for) financing activities
  
6,665
    
(9,949
)
  
(10,987
)
  
(5,623
)
  
9,668
    
(6,312
)
                                     
Decrease in cash and equivalents
  
(549
)
  
(2,434
)
  
(249
)
  
(1,457
)
  
(469
)
  
(981
)
Cash and equivalents at beginning of year
  
11,801
    
15,328
    
2,015
    
3,155
    
10,106
    
12,367
  
Cash and equivalents at June 30
  
11,252
    
12,894
    
1,766
    
1,698
    
9,637
    
11,386
  
Less cash and equivalents of discontinued operations at June 30
  
153
    
3,852
    
-
    
-
    
153
    
3,852
  
Cash and equivalents of continuing operations at June 30
$
11,099
  
$
9,042
  
$
1,766
  
$
1,698
  
$
9,484
  
$
7,534
  

See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.



(6)



Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended
June 30 (Unaudited)
  
Six months ended
June 30 (Unaudited)
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Revenues
                        
Infrastructure
$
11,332
  
$
10,221
  
$
21,484
  
$
19,595
  
Industrial
  
8,788
    
8,253
    
16,928
    
15,921
  
Healthcare
  
4,156
    
3,768
    
7,815
    
7,089
  
NBC Universal
  
3,858
    
3,858
    
8,340
    
7,459
  
Commercial Finance
  
5,527
    
4,929
    
11,011
    
10,001
  
Consumer Finance
  
5,268
    
4,928
    
10,358
    
9,617
  
Total segment revenues
  
38,929
    
35,957
    
75,936
    
69,682
  
Corporate items and eliminations
  
971
    
582
    
1,785
    
1,207
  
Consolidated revenues
$
39,900
  
$
36,539
  
$
77,721
  
$
70,889
  
                         
Segment profit (a)
                        
Infrastructure
$
2,107
  
$
1,916
  
$
3,810
  
$
3,456
  
Industrial
  
729
    
635
    
1,329
    
1,161
  
Healthcare
  
795
    
672
    
1,291
    
1,081
  
NBC Universal
  
882
    
979
    
1,536
    
1,688
  
Commercial Finance
  
1,057
    
872
    
2,231
    
1,798
  
Consumer Finance
  
880
    
735
    
1,716
    
1,470
  
Total segment profit
 
6,450
    
5,809
    
11,913
    
10,654
  
Corporate items and eliminations
  
(387
)
  
(314
)
  
(879
)
  
(639
)
GE interest and other financial charges
  
(486
)
  
(336
)
  
(870
)
  
(717
)
GE provision for income taxes
  
(723
)
  
(783
)
  
(1,268
)
  
(1,362
)
Earnings from continuing operations
 
4,854
    
4,376
    
8,896
    
7,936
  
Earnings (loss) from discontinued operations,
                        
net of taxes
  
(2
)
  
271
    
261
    
676
  
Consolidated net earnings
$
4,852
  
$
4,647
  
$
9,157
  
$
8,612
  
                         

(a)
 
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations and accounting changes, and may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured - excluded in determining segment profit, which we refer to as “operating profit,” for Healthcare, NBC Universal and the industrial businesses of the Infrastructure and Industrial segments; included in determining segment profit, which we refer to as “net earnings,” for Commercial Finance, Consumer Finance, and the financial services businesses of the Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance) and the Industrial segment (Equipment Services).
 

 

(7)

Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. The accompanying condensed, consolidated financial statements represent the consolidation of General Electric Company and all companies that we directly or indirectly control, either through majority ownership or otherwise. See note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2005. That note discusses consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in the Annual Report on Form 10-K, “GE” represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services), which is presented on a one-line basis; GECS consists of General Electric Capital Services, Inc. and all of its affiliates; and “Consolidated” represents the adding together of GE and GECS with the effects of transactions between the two eliminated. We reclassified certain prior-period amounts to conform to the current period’s presentation. Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations.
 
2. The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.
 
3. We classified GE Life, Genworth Financial, Inc. (Genworth) and most of GE Insurance Solutions Corporation (GE Insurance Solutions) as discontinued operations. Associated results of operations, financial position and cash flows are separately reported for all periods presented.
 
Completed sale of GE Insurance Solutions
 
In June 2006, we completed the sale of the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions to Swiss Reinsurance Company (Swiss Re) for $9,297 million, including the assumption of $1,700 million of debt. We received $5,359 million in cash and $2,238 million of newly issued Swiss Re common stock, representing a 9% interest in Swiss Re, that we are not permitted to sell until June 4, 2007, under the agreement we have with Swiss Re. GE Insurance Solutions’ earnings from discontinued operations, net of taxes, for the second quarter of 2006 and first six months of 2006 were $101 million and $236 million, respectively.
 
Completed sale of Genworth
 
In March 2006, we completed the sale of our remaining 18% investment in Genworth through a secondary public offering of 71 million shares of Class A Common Stock and direct sale to Genworth of 15 million shares of Genworth Class B Common Stock. As a result, we recognized a pre-tax gain of $516 million ($300 million after tax) in the first quarter of 2006.
 

(8)

Planned sale of GE Life
 
In March 2006, we initiated a plan to sell GE Life, our U.K.-based life insurance operation. GE Life’s revenues for the second quarter and first six months of 2006 were $63 million and $862 million, respectively; and its earnings from operations for the second quarter and first six months of 2006 were $12 million and $17 million, respectively. For the first six months of 2006, we have provided for a pre-tax loss of $320 million ($285 million after tax), including a $110 million loss recognized in the second quarter of 2006 based on our best estimate of sales proceeds. We do not expect to realize a tax benefit for this loss. We anticipate selling GE Life by March 31, 2007.
 
Summarized financial information
 
Summarized financial information for discontinued operations is set forth below. Gain (loss) on disposal included both actual (GE Insurance Solutions and Genworth) and estimated (GE Life) effects.
 
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Discontinued operations before disposal
                        
Revenues from services
$
1,337
  
$
5,017
  
$
3,682
  
$
10,230
  
                         
Earnings from discontinued operations before
                       
minority interest and income taxes
$
203
  
$
636
  
$
382
  
$
1,334
  
Minority interest
  
-
    
145
    
-
    
244
  
Earnings from discontinued operations before
                        
income taxes
  
203
    
491
    
382
    
1,090
  
Income tax expense
  
(41
)
  
(220
)
  
(82
)
  
(500
)
Earnings from discontinued operations before
                       
disposal, net of taxes
$
162
  
$
271
  
$
300
  
$
590
  
                         
Disposal
                        
Gain (loss) on disposal before income taxes
$
(295
)
$
-
  
$
11
  
$
156
  
Income tax benefit (expense)
  
131
    
-
    
(50
)
  
(70
)
Gain (loss) on disposal, net of taxes
$
(164
)
$
-
  
$
(39
)
$
86
  
                         
Earnings (loss) from discontinued operations,
                       
net of taxes
$
(2
)
$
271
  
$
261
  
$
676
  

 

(9)


 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Assets
            
Cash and equivalents
$
153
  
$
2,976
  
Investment securities
  
11,776
    
37,633
  
Other receivables
  
472
    
13,915
  
Other
 
2,689
    
6,542
  
Assets of discontinued operations
  
15,090
    
61,066
  
Eliminations
  
-
    
-
  
Total
$
15,090
  
$
61,066
  
             
Liabilities and equity
            
Investment contracts, insurance liabilities and insurance annuity benefits
$
13,018
  
$
43,378
  
Other
  
1,941
    
6,385
  
Liabilities of discontinued operations
  
14,959
    
49,763
  
Eliminations
  
(2
)
  
(236
)
Total
$
14,957
  
$
49,527
  
             
Total accumulated nonowner changes other than earnings
$
168
  
$
652
  

 
4. GECS revenues from services are summarized in the following table.
 
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Interest on loans
$
5,627
  
$
5,238
  
$
10,969
  
$
10,101
  
Operating lease rentals
  
3,152
    
2,799
    
6,067
    
5,556
  
Fees
  
1,009
    
971
    
2,016
    
1,818
  
Financing leases
  
1,025
    
1,035
    
2,027
    
2,068
  
Investment income
  
566
    
587
    
1,226
    
1,242
  
Premiums earned by insurance activities
  
485
    
570
    
976
    
1,123
  
Other income
  
2,731
    
2,097
    
5,440
    
4,320
  
Total
$
14,595
  
$
13,297
  
$
28,721
  
$
26,228
  

 

(10)

5. We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans include the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Other pension plans include the U.S. and non-U.S. pension plans whose pension assets or obligations exceeded $50 million. Smaller pension plans and other retiree benefit plans are not material individually or in the aggregate. The effect on operations of the pension and retiree benefit plans follows.
 
 
Principal Pension Plans
  
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Expected return on plan assets
$
(953
)
$
(970
)
$
(1,905
)
$
(1,940
)
Service cost for benefits earned
  
323
    
325
    
689
    
650
  
Interest cost on benefit obligation
  
573
    
563
    
1,152
    
1,120
  
Prior service cost
  
57
    
62
    
115
    
124
  
Net actuarial loss recognized
  
181
    
90
    
369
    
171
  
Cost of pension plans
$
181
  
$
70
  
$
420
  
$
125
  

 
 
Other Pension Plans
  
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Expected return on plan assets
$
(99
)
$
(88
)
$
(197
)
$
(176
)
Service cost for benefits earned
  
83
    
69
    
166
    
142
  
Interest cost on benefit obligation
  
94
    
89
    
187
    
179
  
Prior service cost
  
1
    
1
    
2
    
3
  
Net actuarial loss recognized
  
39
    
26
    
78
    
57
  
Cost of pension plans
$
118
  
$
97
  
$
236
  
$
205
  

 
 
Principal Retiree Health and
Life Insurance Plans
  
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2006
  
2005
  
2006
  
2005
  
                         
Expected return on plan assets
$
(32
)
$
(35
)
$
(64
)
$
(69
)
Service cost for benefits earned
  
54
    
54
    
108
    
107
  
Interest cost on benefit obligation
  
114
    
127
    
228
    
253
  
Prior service cost
  
72
    
74
    
146
    
149
  
Net actuarial loss recognized
  
18
    
18
    
36
    
36
  
Cost of principal retiree benefit plans
$
226
  
$
238
  
$
454
  
$
476
  

 

(11)

6. GE’s authorized common stock consists of 13,200,000,000 shares having a par value of $0.06 each. Information related to the calculation of earnings per share follows.
 
 
Three months ended June 30
  
 
2006
  
2005
  
(In millions; per-share amounts in dollars)
Diluted
  
Basic
  
Diluted
  
Basic
  
                         
Consolidated
                       
Earnings from continuing operations for
                        
per-share calculation(a)
$
4,854
  
$
4,854
  
$
4,376
  
$
4,376
  
Earnings from discontinued operations
                        
for per-share calculation(b)
  
(2
)
  
(2
)
  
269
    
271
  
Net earnings available for per-share calculation
$
4,852
  
$
4,852
  
$
4,645
  
$
4,647
  
                         
Average equivalent shares
                        
Shares of GE common stock outstanding
  
10,362
    
10,362
    
10,604
    
10,604
  
Employee compensation-related shares,
                        
including stock options
  
38
    
-
    
46
    
-
  
Total average equivalent shares
  
10,400
    
10,362
    
10,650
    
10,604
  
                         
Per-share amounts
                        
Earnings from continuing operations
$
0.47
  
$
0.47
  
$
0.41
  
$
0.41
  
Earnings from discontinued operations
$
-
  
$
-
  
$
0.03
  
$
0.03
  
Net earnings
$
0.47
  
$
0.47
  
$
0.44
  
$
0.44
  
                         
 
Six months ended June 30
  
 
2006
  
2005
  
(In millions; per-share amounts in dollars)
Diluted
  
Basic
  
Diluted
  
Basic
  
                         
Consolidated
                       
Earnings from continuing operations for
                        
per-share calculation(a)
$
8,896
  
$
8,896
  
$
7,936
  
$
7,936
  
Earnings from discontinued operations
                        
for per-share calculation(b)
  
261
    
261
    
672
    
676
  
Net earnings available for per-share calculation
$
9,157
  
$
9,157
  
$
8,608
  
$
8,612
  
                         
Average equivalent shares
                        
Shares of GE common stock outstanding
  
10,403
    
10,403
    
10,599
    
10,599
  
Employee compensation-related shares,
                        
including stock options
  
38
    
-
    
45
    
-
  
Total average equivalent shares
  
10,441
    
10,403
    
10,644
    
10,599
  
                         
Per-share amounts
                        
Earnings from continuing operations
$
0.85
  
$
0.86
  
$
0.75
  
$
0.75
  
Earnings from discontinued operations
$
0.02
  
$
0.03
  
$
0.06
  
$
0.06
  
Net earnings
$
0.88
  
$
0.88
  
$
0.81
  
$
0.81
  
                         

(a)
 
Including dividend equivalents.
 
(b)
Including dilutive effects of subsidiary-issued stock-based awards in 2005.

 

(12)

Earnings-per-share amounts are computed independently each quarter for earnings from continuing operations, earnings from discontinued operations and net earnings. As a result, the sum of each quarter’s per-share amount may not equal the total per-share amount for the respective year-to-date period; and the sum of per-share amounts from continuing operations and discontinued operations does not always equal the total per-share net earnings for the respective quarters.
 
7. Inventories consisted of the following.
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Raw materials and work in process
$
6,615
  
$
5,527
  
Finished goods
  
5,385
    
5,311
  
Unbilled shipments
  
363
    
333
  
   
12,363
    
11,171
  
Less revaluation to LIFO
  
(619
)
  
(697
)
Total
$
11,744
  
$
10,474
  

 
8. GECS financing receivables - net, consisted of the following.
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Loans, net of deferred income
$
240,838
  
$
227,923
  
Investment in financing leases, net of deferred income
  
67,679
    
64,309
  
   
308,517
    
292,232
  
Less allowance for losses
  
(4,618
)
  
(4,593
)
Financing receivables - net
$
303,899
  
$
287,639
  

 
Included in the above are the financing receivables of consolidated, liquidating securitization entities as follows (see note 14):
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Loans, net of deferred income
$
13,728
  
$
15,868
  
Investment in financing leases, net of deferred income
  
85
    
769
  
   
13,813
    
16,637
  
Less allowance for losses
  
(34
)
  
(22
)
Financing receivables - net
$
13,779
  
$
16,615
  

 

(13)

9. Property, plant and equipment (including equipment leased to others) - net, consisted of the following.
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Original cost
$
116,708
  
$
111,733
  
Less accumulated depreciation and amortization
  
(45,703
)
  
(44,205
)
Property, plant and equipment - net
$
71,005
  
$
67,528
  

 
10. Intangible assets - net, consisted of the following.
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Goodwill
$
72,468
  
$
69,611
  
Intangible assets subject to amortization
  
10,857
    
9,932
  
Indefinite-lived intangible assets(a)
  
2,258
    
2,087
  
Total
$
85,583
  
$
81,630
  
             

(a)
 
Indefinite-lived intangible assets principally comprised trademarks, tradenames and U.S. Federal Communications Commission licenses.
 

 
Changes in goodwill balances follow.
 
(In millions)
Balance
1/1/06
  
Acquisitions/
purchase
accounting
adjustments
  
Currency
exchange
and other
  
Balance
6/30/06
  
                                 
Infrastructure
$
10,166
    
$
588
      
$
115
    
$
10,869
  
Industrial
  
8,702
      
360
        
10
      
9,072
  
Healthcare
  
13,404
      
1,095
        
22
      
14,521
  
NBC Universal
  
17,534
      
754
        
(372
)
    
17,916
  
Commercial Finance
  
10,621
      
18
        
54
      
10,693
  
Consumer Finance
  
9,184
      
62
        
151
      
9,397
  
Total
$
69,611
    
$
2,877
      
$
(20
)
  
$
72,468
  

 
The amount of goodwill related to new acquisitions recorded during the first six months of 2006 was $2,709 million, the largest of which were IDX Systems Corporation ($1,114 million) by Healthcare, iVillage Inc. ($465 million) by NBC Universal and ZENON Membrane Solutions ($420 million) by Infrastructure. During 2006, we increased goodwill associated with previous acquisitions by $168 million; the largest such adjustment was an increase of $122 million associated with the 2005 acquisition of Ionics, Inc. by Infrastructure. Also during 2006, goodwill at NBC Universal declined by $304 million as part of the sale of four television stations.
 

(14)

Intangible Assets Subject to Amortization
 
 
At
  
 
6/30/06
  
12/31/05
  
(In millions)
Gross
carrying
amount
  
Accumulated
amortization
  
Net
  
Gross
carrying
amount
  
Accumulated
amortization
  
Net
  
                                             
Patents, licenses and trademarks 
$
5,089
    
$
(1,541
)
  
$
3,548
  
$
5,311
    
$
(1,406
)
  
$
3,905
  
Capitalized software
  
5,942
      
(3,410
)
    
2,532
    
5,586
      
(3,059
)
    
2,527
  
All other
  
6,229
      
(1,452
)
    
4,777
    
4,737
      
(1,237
)
    
3,500
  
Total
$
17,260
    
$
(6,403
)
  
$
10,857
  
$
15,634
    
$
(5,702
)
  
$
9,932
  

 
Consolidated amortization expense related to intangible assets subject to amortization amounted to $468 million and $362 million for the quarters ended June 30, 2006 and 2005, respectively. Consolidated amortization expense related to intangible assets subject to amortization for the six months ended June 30, 2006 and 2005, amounted to $900 million and $725 million, respectively.
 

(15)

11. GECS borrowings are summarized in the following table.
 
 
At
  
(In millions)
6/30/06
  
12/31/05
  
             
Short-term borrowings
            
             
Commercial paper
            
U.S.
            
Unsecured
$
63,305
  
$
67,643
  
Asset-backed(a)
  
7,620
    
9,267
  
Non-U.S.
  
22,845
    
20,456
  
Current portion of long-term debt(b)(c)
  
43,498
    
41,792
  
Other
  
19,059
    
18,514
  
Total
  
156,327
    
157,672
  
             
Long-term borrowings
            
             
Senior notes
            
Unsecured
  
205,296
    
180,546
  
Asset-backed(d)
  
6,661
    
6,845
  
Extendible notes(e)
  
13,984
    
14,022
  
Subordinated notes(f)
  
3,092
    
2,984
  
Total
  
229,033
    
204,397
  
Total borrowings
$
385,360
  
$
362,069
  
             

(a)
 
Entirely obligations of consolidated, liquidating securitization entities. See note 14.
 
(b)