frm8k093008.htm
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 September 30, 2008
 
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 001-00035
 
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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
 
Accelerated filer ¨
 
Non-accelerated filer ¨
 
Smaller reporting company ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
There were 9,955,456,000 shares of common stock with a par value of $0.06 per share outstanding at September 26, 2008.
 

 
(1)
 

General Electric Company
 
   
Page
Part I - Financial Information
    
     
Item 1. Financial Statements
    
Condensed Statement of Earnings
    
 
3
 
4
 
5
 
6
 
7
 
8
 
29
 
47
 
47
     
Part II - Other Information
    
     
 
48
 
48
 
52
 
52
 
53
 
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 “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest and exchange rates, commodity and equity prices and the value of financial assets; continued volatility and further deterioration of the capital markets; the commercial and consumer credit environment; the impact of regulation and regulatory, investigative and legal actions; strategic actions, including acquisitions and 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; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive 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 September 30 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
  
2008
    
2007
      
2008
    
2007
    
2008
    
2007
  
                                       
Sales of goods
$
17,924
  
$
15,354
    
$
17,473
  
$
15,271
  
$
579
  
$
277
  
Sales of services
  
11,236
    
9,301
      
11,395
    
9,419
    
–
    
–
  
Other income
  
544
    
384
      
659
    
464
    
–
    
–
  
GECS earnings from continuing operations
  
–
    
–
      
2,010
    
3,219
    
–
    
–
  
GECS revenues from services
  
17,530
    
17,473
      
–
    
–
    
17,852
    
17,789
  
Total revenues
  
47,234
    
42,512
      
31,537
    
28,373
    
18,431
    
18,066
  
                                       
Cost of goods sold
  
14,184
    
12,113
      
13,826
    
12,071
    
486
    
236
  
Cost of services sold
  
7,953
    
6,145
      
8,112
    
6,262
    
–
    
–
  
Interest and other financial charges
  
6,955
    
6,070
      
525
    
473
    
6,723
    
5,780
  
Investment contracts, insurance losses and
                                      
insurance annuity benefits
  
787
    
849
      
–
    
–
    
839
    
889
  
Provision for losses on financing receivables
  
1,641
    
1,190
      
–
    
–
    
1,641
    
1,190
  
Other costs and expenses
  
10,542
    
10,204
      
3,541
    
3,684
    
7,093
    
6,694
  
Minority interest in net earnings of
                                      
consolidated affiliates
  
156
    
190
      
60
    
136
    
96
    
54
  
Total costs and expenses
  
42,218
    
36,761
      
26,064
    
22,626
    
16,878
    
14,843
  
                                       
Earnings from continuing operations
                                      
before income taxes
  
5,016
    
5,751
      
5,473
    
5,747
    
1,553
    
3,223
  
Benefit (provision) for income taxes
  
(539
)
  
(640
)
    
(996
)
  
(636
)
  
457
    
(4
)
Earnings from continuing operations
  
4,477
    
5,111
      
4,477
    
5,111
    
2,010
    
3,219
  
Earnings (loss) from discontinued operations,
                                      
net of taxes
  
(165
)
  
448
      
(165
)
  
448
    
(170
)
  
(1,352
)
Net earnings
$
4,312
  
$
5,559
    
$
4,312
  
$
5,559
  
$
1,840
  
$
1,867
  
                                       
Per-share amounts
                                      
Per-share amounts – earnings from
                                      
continuing operations
                                      
Diluted earnings per share
$
0.45
  
$
0.50
                            
Basic earnings per share
$
0.45
  
$
0.50
                            
                                       
Per-share amounts – net earnings
                                      
Diluted earnings per share
$
0.43
  
$
0.54
                            
Basic earnings per share
$
0.43
  
$
0.55
                            
                                       
Dividends declared per share
$
0.31
  
$
0.28
                            
                                       

(a)
 
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.
 
See accompanying notes. 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
 
 
Nine months ended September 30 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
  
2008
    
2007
      
2008
    
2007
    
2008
    
2007
  
                                       
Sales of goods
$
50,092
  
$
43,352
    
$
48,876
  
$
43,373
  
$
1,474
  
$
337
  
Sales of services
  
31,489
    
26,867
      
32,024
    
27,274
    
–
    
–
  
Other income
  
1,693
    
2,319
      
1,984
    
2,550
    
–
    
–
  
GECS earnings from continuing operations
  
–
    
–
      
7,240
    
9,042
    
–
    
–
  
GECS revenues from services
  
53,028
    
51,417
      
–
    
–
    
54,027
    
52,308
  
Total revenues
  
136,302
    
123,955
      
90,124
    
82,239
    
55,501
    
52,645
  
                                       
Cost of goods sold
  
39,977
    
34,607
      
38,971
    
34,681
    
1,264
    
284
  
Cost of services sold
  
20,882
    
17,005
      
21,417
    
17,412
    
–
    
–
  
Interest and other financial charges
  
20,103
    
17,279
      
1,681
    
1,428
    
19,242
    
16,478
  
Investment contracts, insurance losses and
                                      
insurance annuity benefits
  
2,412
    
2,601
      
–
    
–
    
2,557
    
2,744
  
Provision for losses on financing receivables
  
4,453
    
3,132
      
–
    
–
    
4,453
    
3,132
  
Other costs and expenses
  
31,317
    
29,733
      
10,780
    
10,636
    
20,862
    
19,449
  
Minority interest in net earnings of
                                      
consolidated affiliates
  
502
    
634
      
318
    
445
    
184
    
189
  
Total costs and expenses
  
119,646
    
104,991
      
73,167
    
64,602
    
48,562
    
42,276
  
                                       
Earnings from continuing operations
                                      
before income taxes
  
16,656
    
18,964
      
16,957
    
17,637
    
6,939
    
10,369
  
Benefit (provision) for income taxes
  
(2,434
)
  
(3,334
)
    
(2,735
)
  
(2,007
)
  
301
    
(1,327
)
Earnings from continuing operations
  
14,222
    
15,630
      
14,222
    
15,630
    
7,240
    
9,042
  
Loss from discontinued operations,
                                      
net of taxes
  
(534
)
  
(118
)
    
(534
)
  
(118
)
  
(568
)
  
(1,986
)
Net earnings
$
13,688
  
$
15,512
    
$
13,688
  
$
15,512
  
$
6,672
  
$
7,056
  
                                       
Per-share amounts
                                      
Per-share amounts – earnings from
                                      
continuing operations
                                      
Diluted earnings per share
$
1.42
  
$
1.52
                            
Basic earnings per share
$
1.43
  
$
1.53
                            
                                       
Per-share amounts – net earnings
                                      
Diluted earnings per share
$
1.37
  
$
1.51
                            
Basic earnings per share
$
1.37
  
$
1.52
                            
                                       
Dividends declared per share
$
0.93
  
$
0.84
                            
                                       

(a)
 
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.
 
See accompanying notes. 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(a)
  
Financial
Services (GECS)
  
(In millions; except share amounts)
September 30,
2008
  
December 31,
2007
    
September 30,
2008
  
December 31,
2007
  
September 30,
2008
  
December 31,
2007
  
 
(Unaudited)
   
      
(Unaudited)
   
  
   
(Unaudited)
   
    
                                       
Cash and equivalents
$
16,301
  
$
15,731
    
$
3,498
  
$
6,702
  
$
13,075
  
$
9,439
  
Investment securities
  
43,459
    
45,276
      
276
    
343
    
43,188
    
44,941
  
Current receivables
  
22,439
    
22,259
      
14,792
    
15,093
    
–
    
–
  
Inventories
  
14,719
    
12,897
      
14,646
    
12,834
    
73
    
63
  
Financing receivables – net
  
413,170
    
376,123
      
–
    
–
    
421,788
    
384,067
  
Other GECS receivables
  
15,620
    
16,514
      
–
    
–
    
21,072
    
22,078
  
Property, plant and equipment (including
                                      
equipment leased to others) – net
  
80,095
    
77,888
      
14,316
    
14,142
    
65,779
    
63,746
  
Investment in GECS
  
–
    
–
      
55,698
    
57,676
    
–
    
–
  
Goodwill
  
83,061
    
81,116
      
56,742
    
55,689
    
26,319
    
25,427
  
Other intangible assets – net
  
15,593
    
16,142
      
11,401
    
11,633
    
4,192
    
4,509
  
All other assets
  
123,855
    
122,848
      
43,481
    
40,608
    
81,628
    
83,392
  
Assets of discontinued operations
  
1,238
    
8,889
      
–
    
66
    
1,238
    
8,823
  
Total assets
$
829,550
  
$
795,683
    
$
214,850
  
$
214,786
  
$
678,352
  
$
646,485
  
                                       
Short-term borrowings
$
218,748
  
$
195,100
    
$
4,394
  
$
4,106
  
$
215,409
  
$
192,420
  
Accounts payable, principally trade accounts
  
20,679
    
21,338
      
11,409
    
11,120
    
13,952
    
14,714
  
Progress collections and price adjustments accrued
  
12,835
    
9,885
      
13,422
    
10,374
    
–
    
–
  
Other GE current liabilities
  
20,344
    
18,916
      
20,447
    
18,916
    
–
    
–
  
Long-term borrowings
  
329,915
    
319,013
      
10,018
    
11,656
    
321,019
    
308,502
  
Investment contracts, insurance liabilities
                                      
and insurance annuity benefits
  
34,533
    
34,068
      
–
    
–
    
34,886
    
34,359
  
All other liabilities
  
55,933
    
59,316
      
32,034
    
32,859
    
23,951
    
26,522
  
Deferred income taxes
  
14,269
    
12,490
      
3,942
    
3,391
    
10,327
    
9,099
  
Liabilities of discontinued operations
  
931
    
1,994
      
188
    
302
    
743
    
1,692
  
Total liabilities
  
708,187
    
672,120
      
95,854
    
92,724
    
620,287
    
587,308
  
                                       
Minority interest in equity of consolidated affiliates
  
9,036
    
8,004
      
6,669
    
6,503
    
2,367
    
1,501
  
Common stock (9,955,456,000 and 9,987,599,000
                                      
shares outstanding at September 30, 2008 and
                                      
December 31, 2007, respectively)
  
669
    
669
      
669
    
669
    
1
    
1
  
Accumulated gains (losses) – net
                                      
Investment securities
  
(2,290
)
  
124
      
(2,290
)
  
124
    
(2,251
)
  
110
  
Currency translation adjustments
  
7,200
    
10,708
      
7,200
    
10,708
    
4,816
    
7,472
  
Cash flow hedges
  
(2,168
)
  
(668
)
    
(2,168
)
  
(668
)
  
(2,096
)
  
(727
)
Benefit plans
  
(916
)
  
(1,840
)
    
(916
)
  
(1,840
)
  
(84
)
  
(105
)
Other capital
  
25,906
    
26,100
      
25,906
    
26,100
    
12,580
    
12,574
  
Retained earnings
  
121,755
    
117,362
      
121,755
    
117,362
    
42,732
    
38,351
  
Less common stock held in treasury
  
(37,829
)
  
(36,896
)
    
(37,829
)
  
(36,896
)
  
–
    
–
  
                                       
Total shareowners’ equity
  
112,327
    
115,559
      
112,327
    
115,559
    
55,698
    
57,676
  
                                       
Total liabilities and equity
$
829,550
  
$
795,683
    
$
214,850
  
$
214,786
  
$
678,352
  
$
646,485
  
                                       

The sum of accumulated gains (losses) on investment securities, currency translation adjustments, cash flow hedges and benefit plans constitutes “Accumulated nonowner changes other than earnings,” and was $1,826 million and $8,324 million at September 30, 2008, and December 31, 2007, respectively.
 
(a)
 
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.
 
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns.

 

 
(5)
 

Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
 
 
Nine months ended September 30 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial
Services (GECS)
  
(In millions)
  
2008
    
2007
  
  
  
2008
    
2007
    
2008
    
2007
  
                                       
Cash flows – operating activities
                                      
Net earnings
$
13,688
  
$
15,512
    
$
13,688
  
$
15,512
  
$
6,672
  
$
7,056
  
Loss from discontinued operations
  
534
    
118
      
534
    
118
    
568
    
1,986
  
Adjustments to reconcile net earnings to cash
                                      
provided from operating activities
                                      
Depreciation and amortization of property,
                                      
plant and equipment
  
8,216
    
7,431
      
1,587
    
1,577
    
6,629
    
5,854
  
Net earnings from continuing operations retained by GECS
  
–
    
–
      
(4,949
)
  
(3,171
)
  
–
    
–
  
Deferred income taxes
  
1,798
    
828
      
(454
)
  
278
    
2,252
    
550
  
Decrease (increase) in GE current receivables
  
(1,344
)
  
(159
)
    
41
    
1,004
    
–
    
–
  
Increase in inventories
  
(1,765
)
  
(2,017
)
    
(1,624
)
  
(1,959
)
  
(10
)
  
(4
)
Increase (decrease) in accounts payable
  
(411
)
  
(2,665
)
    
444
    
(1,071
)
  
(669
)
  
(1,359
)
Increase in GE progress collections
  
3,103
    
2,998
      
3,241
    
2,805
    
–
    
–
  
Provision for losses on GECS financing receivables
  
4,453
    
3,132
      
–
    
–
    
4,453
    
3,132
  
All other operating activities
  
(468
)
  
(1,052
)
    
1,127
    
1,574
    
(1,751
)
  
(3,000
)
Cash from operating activities – continuing operations
  
27,804
    
24,126
      
13,635
    
16,667
    
18,144
    
14,215
  
Cash from (used for) operating activities – discontinued operations
  
497
    
4,099
      
(9
)
  
(856
)
  
506
    
4,757
  
Cash from operating activities
  
28,301
    
28,225
      
13,626
    
15,811
    
18,650
    
18,972
  
                                       
Cash flows – investing activities
                                      
Additions to property, plant and equipment
  
(11,484
)
  
(12,115
)
    
(2,263
)
  
(2,025
)
  
(9,468
)
  
(10,334
)
Dispositions of property, plant and equipment
  
7,286
    
7,218
      
–
    
–
    
7,286
    
7,218
  
Net increase in GECS financing receivables
  
(26,898
)
  
(24,482
)
    
–
    
–
    
(28,359
)
  
(24,662
)
Proceeds from sales of discontinued operations
  
5,423
    
11,457
      
203
    
10,826
    
5,220
    
–
  
Proceeds from principal business dispositions
  
4,480
    
2,114
      
58
    
1,012
    
4,422
    
1,102
  
Payments for principal businesses purchased
  
(27,042
)
  
(14,910
)
    
(2,053
)
  
(7,388
)
  
(24,989
)
  
(7,522
)
All other investing activities
  
(3,283
)
  
(6,792
)
    
(56
)
  
(2,108
)
  
(2,948
)
  
(4,519
)
Cash from (used for) investing activities – continuing operations
  
(51,518
)
  
(37,510
)
    
(4,111
)
  
317
    
(48,836
)
  
(38,717
)
Cash from (used for) investing activities – discontinued operations
  
(616
)
  
(3,973
)
    
9
    
1,002
    
(625
)
  
(4,777
)
Cash from (used for) investing activities
  
(52,134
)
  
(41,483
)
    
(4,102
)
  
1,319
    
(49,461
)
  
(43,494
)
                                       
Cash flows – financing activities
                                      
Net decrease in borrowings (maturities of
                                      
90 days or less)
  
(18,298
)
  
(8,589
)
    
(1,719
)
  
(2,853
)
  
(16,949
)
  
(8,467
)
Newly issued debt (maturities longer than 90 days)
  
99,373
    
81,450
      
122
    
4,663
    
99,228
    
76,834
  
Repayments and other reductions (maturities longer
                                      
than 90 days)
  
(45,055
)
  
(36,801
)
    
(145
)
  
(171
)
  
(44,910
)
  
(36,630
)
Net purchases of GE shares for treasury
  
(1,678
)
  
(7,220
)
    
(1,678
)
  
(7,220
)
  
–
    
–
  
Dividends paid to shareowners
  
(9,308
)
  
(8,651
)
    
(9,308
)
  
(8,651
)
  
(2,291
)
  
(5,871
)
All other financing activities
  
(750
)
  
(1,068
)
    
–
    
–
    
(750
)
  
(1,068
)
Cash from (used for) financing activities – continuing operations
  
24,284
    
19,121
      
(12,728
)
  
(14,232
)
  
34,328
    
24,798
  
Cash used for financing activities – discontinued operations
  
(4
)
  
(151
)
    
–
    
(146
)
  
(4
)
  
(5
)
Cash from (used for) financing activities
  
24,280
    
18,970
      
(12,728
)
  
(14,378
)
  
34,324
    
24,793
  
Increase (decrease) in cash and equivalents
  
447
    
5,712
      
(3,204
)
  
2,752
    
3,513
    
271
  
Cash and equivalents at beginning of year
  
16,031
    
14,276
      
6,702
    
4,480
    
9,739
    
12,629
  
Cash and equivalents at September 30
  
16,478
    
19,988
      
3,498
    
7,232
    
13,252
    
12,900
  
Less cash and equivalents of discontinued operations at September 30
  
177
    
165
      
–
    
–
    
177
    
165
  
Cash and equivalents of continuing operations at September 30
$
16,301
  
$
19,823
    
$
3,498
  
$
7,232
  
$
13,075
  
$
12,735
  
                                       

(a)
 
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.
 
See accompanying notes. Separate information is shown for “GE” and “Financial Services (GECS).” Transactions between GE and GECS have been eliminated from the “Consolidated” columns and are discussed in Note 17.

 
(6)
 

Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended
September 30 (Unaudited)
  
Nine months ended
September 30 (Unaudited)
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Revenues
                        
Technology Infrastructure
$
11,450
  
$
10,549
  
$
33,761
  
$
30,309
  
Energy Infrastructure
  
9,769
    
7,386
    
27,164
    
21,251
  
Capital Finance
  
17,292
    
16,979
    
52,242
    
48,447
  
NBC Universal
  
5,073
    
3,756
    
12,539
    
10,865
  
Consumer & Industrial
  
2,989
    
3,163
    
8,990
    
9,337
  
Total segment revenues
  
46,573
    
41,833
    
134,696
    
120,209
  
Corporate items and eliminations
  
661
    
679
    
1,606
    
3,746
  
Consolidated revenues
$
47,234
  
$
42,512
  
$
136,302
  
$
123,955
  
                         
Segment profit(a)
                        
Technology Infrastructure
$
1,900
  
$
1,869
  
$
5,657
  
$
5,408
  
Energy Infrastructure
  
1,425
    
1,086
    
4,074
    
3,016
  
Capital Finance
  
2,020
    
3,021
    
7,602
    
9,080
  
NBC Universal
  
645
    
589
    
2,266
    
2,184
  
Consumer & Industrial
  
47
    
255
    
329
    
780
  
Total segment profit
  
6,037
    
6,820
    
19,928
    
20,468
  
Corporate items and eliminations
  
(39
)
  
(600
)
  
(1,290
)
  
(1,403
)
GE interest and other financial charges
  
(525
)
  
(473
)
  
(1,681
)
  
(1,428
)
GE provision for income taxes
  
(996
)
  
(636
)
  
(2,735
)
  
(2,007
)
Earnings from continuing operations
  
4,477
    
5,111
    
14,222
    
15,630
  
Earnings (loss) from discontinued operations,
                        
net of taxes
  
(165
)
  
448
    
(534
)
  
(118
)
Consolidated net earnings
$
4,312
  
$
5,559
  
$
13,688
  
$
15,512
  
                         

(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 sometimes refer to as “operating profit,” for Technology Infrastructure, Energy Infrastructure, NBC Universal and Consumer & Industrial; included in determining segment profit, which we sometimes refer to as “net earnings,” for Capital Finance.
 
See accompanying notes to condensed, consolidated financial statements.

 

 
(7)
 

Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. Summary of Significant Accounting Policies
 
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 for the year ended December 31, 2007, included in our Form 8-K dated October 8, 2008, which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in the financial statements included in our Form 8-K dated October 8, 2008, “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. GE includes Technology Infrastructure, Energy Infrastructure, NBC Universal and Consumer & Industrial. GECS includes Capital Finance. We have 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.
 
Our accounting policy for sales of goods and services is included below. See Note 1 to the consolidated financial statements for the year ended December 31, 2007, included in our Form 8-K dated October 8, 2008, for a summary of the remainder of our significant accounting policies.
 
Sales of goods and services
 
We record all sales of goods and services only when a firm sales agreement is in place, delivery has occurred or services have been rendered and collectibility of the fixed or determinable sales price is reasonably assured. In addition, if a sales agreement includes customer acceptance provisions, we recognize revenues as follows:
 
·  
In arrangements where we provide equipment and software for trial and evaluation purposes, we only recognize revenue after the customer accepts the product as set forth in the contract. In rare instances, we offer acceptance provisions that lapse over time. In these instances, we only recognize revenue upon the earlier of customer acceptance or after the specified time elapses.
 
·  
If a sales agreement includes general return rights, revenue is deferred until the return rights lapse unless future returns can be reasonably estimated, in which case revenue is recognized and an allowance is recorded for the returns.
 
·  
In situations where acceptance provisions are based on seller-specified objective criteria, we recognize revenue only after we have demonstrated that the delivered product meets those specifications.
 
·  
If a sales agreement includes customer-specified objective criteria, we recognize revenue when formal acceptance occurs or we have reliably demonstrated that all specified customer acceptance criteria have been met.
 
Sales of goods in the Consumer & Industrial segment typically do not include multiple product and/or service elements. In contrast, sales of goods in the Technology Infrastructure and Energy Infrastructure segments sometimes include multiple components. Our arrangements with multiple components usually involve future service deliverables such as installation, training or the future delivery of ancillary equipment. In such agreements, the amount assigned to each component is based on the total price and the undelivered component’s objectively determined fair value, determined from sources such as the separate selling price for that or a similar component or from competitor prices for similar components. If fair value of an undelivered component cannot be satisfactorily determined, we defer revenue until all multiple components are delivered.
 

 
(8)
 

Certain of our sales of products and services involve inconsequential or perfunctory performance obligations. These obligations can include non-essential installation or training, non-essential third party supplied items related to sales of healthcare devices, commissioning services related to the sales of locomotives, and provision of product manuals and limited technical product support. We consider these obligations to be inconsequential and perfunctory as their fair value is relatively insignificant relative to the related revenue; we have a demonstrated history of completing the remaining tasks in a timely manner; the work can be performed by customers or other contractors; and in the event that we were to fail to complete the remaining obligations under the sales contract, we do not have a refund obligation. When the only remaining undelivered performance obligation under an arrangement is inconsequential or perfunctory, we recognize revenue on the total contract and provide for the cost of the unperformed obligation.
 
Except for goods sold under long-term agreements, we recognize sales of goods under the provisions of U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 104, Revenue Recognition. Among other things, we recognize such sales when we have no risk of transit damage, a policy that in certain cases requires us to delay recognition of otherwise qualified sales until the goods have been physically delivered. We often sell consumer products, home videos and computer hardware and software products with a right of return. We use our accumulated experience to estimate and provide for such returns when we record the sale. Unless otherwise noted, we do not provide for anticipated losses before we record sales.
 
We account for revenue recognition on agreements for sales of goods and services under power generation unit and uprate contracts; nuclear fuel assemblies; larger oil drilling equipment projects; turbo-machinery unit contracts; military development contracts; and long-term construction projects, including construction of information technology systems in our Healthcare business, under AICPA Statement of Position (SOP) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Under SOP 81-1, we estimate total contract revenue net of price concessions as well as total contract costs. For goods sold under power generation unit and uprate contracts, nuclear fuel assemblies, turbo-machinery unit contracts and military development contracts, we recognize sales as we complete major contract-specified deliverables, most often when customers receive title to the goods or accept the services as performed. For larger oil drilling equipment projects and long-term construction projects, we recognize sales based on our progress towards contract completion measured by actual costs incurred in relation to our estimate of total expected costs. We measure SOP 81-1 revenues by applying our contract-specific estimated margin rates to incurred costs. We routinely update our estimates of future costs for agreements in process and report any cumulative effects of such adjustments in current operations. We provide for any loss that we expect to incur on these agreements when that loss is probable.
 
We recognize revenue upon delivery for sales of aircraft engines, military propulsion equipment and related spare parts not sold under long-term product services agreements. Delivery of large and small commercial engines, non-U.S. military equipment and all related spare parts occurs on shipment; delivery of military propulsion equipment sold to the U.S. Government or agencies thereof occurs upon receipt of a Material Inspection and Receiving Report, DD Form 250 or Memorandum of Shipment. Large commercial engines (CF6, CFM56, GE90, GEnx and GP7000) are complex aerospace equipment manufactured to customer order under a variety of sometimes-complex, long-term agreements. We measure sales of large commercial engines by applying our contract-specific estimated margin rates to incurred costs. We routinely update our estimates of future costs for large commercial engine agreements in process and report any cumulative effects of such adjustments in current operations. We measure revenue for small aircraft engines, military propulsion equipment and spare parts not subject to long-term product services agreements based on the specific contract on a specifically-measured output basis. We provide for any loss that we expect to incur on these agreements when that loss is probable; consistent with industry practice, for commercial engines, we make such provision only if such losses are not recoverable from future highly probable sales of spare parts for those engines.
 

 
(9)
 

We sell product services under long-term agreements in our Technology Infrastructure and Energy Infrastructure segments, principally in Aviation, Energy and Transportation, where costs of performing services are incurred on other than a straight-line basis. We also sell product services in Healthcare, where such costs are expected to be on a straight-line basis. All of these agreements are accounted for under Financial Accounting Standards Board (FASB) Technical Bulletin (FTB) 90-1, Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts. For the Aviation, Energy and Transportation FTB 90-1 agreements, we recognize related sales based on the extent of our progress towards completion measured by actual costs incurred in relation to total expected costs. We routinely update our estimates of future costs for agreements in process and report any cumulative effects of such adjustments in current operations. For the Healthcare FTB 90-1 agreements, we recognize revenues on a straight-line basis and expense related costs as incurred. We provide for any loss that we expect to incur on any of these agreements when that loss is probable.
 
NBC Universal records broadcast and cable television and Internet advertising sales when advertisements are aired, net of provision for any viewer shortfalls (make goods). We record sales from theatrical distribution of films as the films are exhibited; sales of home videos, net of a return provision, when the videos are delivered to and available for sale by retailers; fees from cable/satellite operators when services are provided; and licensing of film and television programming when we make the material available for airing.
 
Accounting changes
 
On January 1, 2008, we adopted FASB Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, and SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, which are more fully discussed in Note 14 to the condensed, consolidated financial statements.
 
2. Interim Period Presentation
 
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. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our Form 8-K dated October 8, 2008. 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. Discontinued Operations
 
Discontinued operations is comprised of our Japanese personal loan business (Lake) and our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. (GE Money Japan), our U.S. mortgage business (WMC), Plastics, Advanced Materials, GE Life, Genworth Financial, Inc. (Genworth) and most of GE Insurance Solutions Corporation (GE Insurance Solutions). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
 

 
(10)
 

GE Money Japan
 
During the third quarter of 2007, we committed to a plan to sell Lake upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the second quarter of 2008, we committed to sell GE Money Japan, resulting in the addition of our Japanese mortgage and card businesses to discontinued operations. Subsequent to the end of the second quarter, we reached an agreement to sell these businesses and completed the sale during the third quarter of 2008. In connection with this agreement, and primarily related to our Japanese mortgage and card businesses, we recorded an incremental $247 million impairment loss in the first nine months of 2008. Under this agreement, the sale proceeds will be increased or reduced to reflect our portion of actual interest refund claims based on terms specified in the agreement. GE Money Japan revenues from discontinued operations were $209 million and $298 million in the third quarters of 2008 and 2007, respectively, and $760 million and $1,017 million in the first nine months of 2008 and 2007, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $160 million and $1,030 million in the third quarters of 2008 and 2007, respectively, and $508 million and $1,077 million in the first nine months of 2008 and 2007, respectively.
 
WMC
 
During the fourth quarter of 2007, we completed the sale of our U.S. mortgage business. In connection with the transaction, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC’s contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. Reserves related to these obligations were $224 million at September 30, 2008. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. Based on our historical experience, we estimate that a small percentage of the total loans we originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations. The amount of our current reserve represents our best estimate of losses with respect to our repurchase obligations. However, actual losses could exceed our reserve amount, if actual claim rates, valid tenders or losses we incur on repurchased loans, are higher than historically observed. WMC revenues from discontinued operations were $(7) million and $(431) million in the third quarters of 2008 and 2007, respectively, and $(64) million and $(1,291) million in the first nine months of 2008 and 2007, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $8 million and $332 million in the third quarters of 2008 and 2007, respectively, and $35 million and $916 million in the first nine months of 2008 and 2007, respectively.
 
Plastics and Advanced Materials
 
During the third quarter of 2007, we completed the sale of our Plastics business to Saudi Basic Industries Corporation. Also, during the fourth quarter of 2006, we sold our Advanced Materials business. Plastics revenues from discontinued operations were $1,001 million in the third quarter of 2007 and $4,286 million in the first nine months of 2007. In total, Plastics and Advanced Materials earnings from discontinued operations, net of taxes, were $5 million and $1,800 million in the third quarters of 2008 and 2007, respectively, and $34 million and $1,868 million in the first nine months of 2008 and 2007, respectively.
 
Insurance
 
In total, earnings (losses) from insurance-related discontinued operations, net of taxes, were $(2) million and $10 million in the third quarters of 2008 and 2007, respectively, and $(25) million and $7 million in the first nine months of 2008 and 2007, respectively.
 

 
(11)
 

Summarized financial information for discontinued GE industrial operations is shown below.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Operations
                        
Total revenues
$
–
  
$
1,001
  
$
–
  
$
4,286
  
                         
Earnings from discontinued operations
                        
before income taxes
$
10
  
$
28
  
$
–
  
$
238
  
Income tax benefit (expense)
  
(4
)
  
61
    
16
    
69
  
Earnings from discontinued operations before
                        
disposal, net of taxes
$
6
  
$
89
  
$
16
  
$
307
  
                         
Disposal
                        
Gain (loss) on disposal before income taxes
$
(1
)
$
2,554
  
$
18
  
$
2,363
  
Income tax expense
  
–
    
(843
)
  
–
    
(802
)
Gain (loss) on disposal, net of taxes
$
(1
)
$
1,711
  
$
18
  
$
1,561
  
                         
Earnings from discontinued operations, net of taxes(a)
$
5
  
$
1,800
  
$
34
  
$
1,868
  
                         

(a)
The sum of GE industrial earnings from discontinued operations, net of taxes, and GECS loss from discontinued operations, net of taxes, below are reported as GE industrial earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.

 
Assets of GE industrial discontinued operations were $66 million at December 31, 2007. There were no such assets at September 30, 2008. Liabilities of GE industrial discontinued operations were $188 million and $302 million at September 30, 2008, and December 31, 2007, respectively, and primarily represent taxes payable and pension liabilities related to the sale of our Plastics business.
 
Summarized financial information for discontinued GECS operations is shown below.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Operations
                        
Total revenues
$
202
  
$
(133
)
$
696
  
$
(274
)
                         
Loss from discontinued operations before
                        
income taxes
$
(207
)
$
(615
)
$
(516
)
$
(1,929
)
Income tax benefit
  
50
    
184
    
193
    
863
  
Loss from discontinued operations,
                        
net of taxes
$
(157
)
$
(431
)
$
(323
)
$
(1,066
)
                         
Disposal
                        
Loss on disposal before income taxes
$
(1,277
)
$
(1,549
)
$
(1,499
)
$
(1,560
)
Income tax benefit
  
1,264
    
628
    
1,254
    
640
  
Loss on disposal, net of taxes
$
(13
)
$
(921
)
$
(245
)
$
(920
)
                         
Loss from discontinued operations, net of taxes
$
(170
)
$
(1,352
)
$
(568
)
$
(1,986
)

 


 
(12)
 


 
At
(In millions)
September 30,
2008
  
December 31,
2007
             
Assets
            
Cash and equivalents
$
177
  
$
300
  
Financing receivables – net
  
–
    
6,675
  
Other
  
1,061
    
1,848
  
Assets of discontinued operations
$
1,238
  
$
8,823
  

 
 
At
(In millions)
September 30,
2008
  
December 31,
2007
             
Liabilities
            
Liabilities of discontinued operations
$
743
  
$
1,692
  

 
4. GECS Revenues from Services
 
GECS revenues from services are summarized in the following table.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Interest on loans
$
7,198
  
$
6,075
  
$
20,426
  
$
17,438
  
Equipm