frm10q.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, 2007
 
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 10,106,209,000 shares of common stock with a par value of $0.06 per share outstanding at September 30, 2007.
 


General Electric Company
 
   
Page
Part I - Financial Information
    
     
Item 1. Financial Statements
    
Condensed Statement of Earnings
    
 
3
 
4
 
5
 
6
 
7
 
8
 
20
 
33
     
Part II - Other Information
    
     
 
33
 
34
 
35
 
36
 
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 and commodity and equity prices; 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.
 


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
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
                                     
Sales of goods
$
15,354
  
$
13,390
  
$
15,271
  
$
12,990
  
$
277
  
$
519
  
Sales of services
  
9,269
    
9,110
    
9,387
    
9,199
    
-
    
-
  
Other income
  
384
    
567
    
464
    
610
    
-
    
-
  
GECS earnings from continuing operations
  
-
    
-
    
3,214
    
2,521
    
-
    
-
  
GECS revenues from services
  
17,527
    
14,807
    
-
    
-
    
17,843
    
15,067
  
Total revenues
  
42,534
    
37,874
    
28,336
    
25,320
    
18,120
    
15,586
  
                                     
Cost of goods sold
  
12,113
    
10,862
    
12,071
    
10,500
    
236
    
480
  
Cost of services sold
  
6,145
    
5,754
    
6,262
    
5,844
    
-
    
-
  
Interest and other financial charges
  
6,077
    
5,030
    
473
    
467
    
5,787
    
4,729
  
Investment contracts, insurance losses and
                                    
insurance annuity benefits
  
849
    
822
    
-
    
-
    
889
    
867
  
Provision for losses on financing receivables
  
1,223
    
793
    
-
    
-
    
1,223
    
793
  
Other costs and expenses
  
10,232
    
8,791
    
3,684
    
3,020
    
6,722
    
5,863
  
Minority interest in net earnings of
                                    
consolidated affiliates
  
190
    
198
    
136
    
142
    
54
    
56
  
Total costs and expenses
  
36,829
    
32,250
    
22,626
    
19,973
    
14,911
    
12,788
  
                                     
Earnings from continuing operations
                                    
before income taxes
  
5,705
    
5,624
    
5,710
    
5,347
    
3,209
    
2,798
  
Benefit (provision) for income taxes
  
(619
)
  
(875
)
  
(624
)
  
(598
)
  
5
    
(277
)
Earnings from continuing operations
  
5,086
    
4,749
    
5,086
    
4,749
    
3,214
    
2,521
  
Earnings (loss) from discontinued operations,
                                    
net of taxes
  
453
    
117
    
453
    
117
    
(1,347
)
  
(9
)
Net earnings
$
5,539
  
$
4,866
  
$
5,539
  
$
4,866
  
$
1,867
  
$
2,512
  
                                     
Per-share amounts
                                    
Per-share amounts - earnings from
                                    
continuing operations
                                    
Diluted earnings per share
$
0.50
  
$
0.46
                          
Basic earnings per share
$
0.50
  
$
0.46
                          
                                     
Per-share amounts - net earnings
                                    
Diluted earnings per share
$
0.54
  
$
0.47
                          
Basic earnings per share
$
0.54
  
$
0.47
                          
                                     
Dividends declared per share
$
0.28
  
$
0.25
                          

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.
 


Condensed Statement of Earnings
General Electric Company and consolidated affiliates
 
 
Nine months ended September 30 (Unaudited)
  
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
                                     
Sales of goods
$
43,345
  
$
40,098
  
$
43,366
  
$
38,658
  
$
337
  
$
1,786
  
Sales of services
  
26,886
    
26,397
    
27,293
    
26,679
    
-
    
-
  
Other income
  
2,319
    
1,662
    
2,550
    
1,771
    
-
    
-
  
GECS earnings from continuing operations
  
-
    
-
    
9,059
    
7,343
    
-
    
-
  
GECS revenues from services
  
51,612
    
42,382
    
-
    
-
    
52,503
    
43,131
  
Total revenues
  
124,162
    
110,539
    
82,268
    
74,451
    
52,840
    
44,917
  
                                     
Cost of goods sold
  
34,604
    
31,906
    
34,678
    
30,600
    
284
    
1,652
  
Cost of services sold
  
17,005
    
17,060
    
17,412
    
17,342
    
-
    
-
  
Interest and other financial charges
  
17,300
    
13,726
    
1,428
    
1,255
    
16,499
    
12,922
  
Investment contracts, insurance losses and
                                    
insurance annuity benefits
  
2,601
    
2,364
    
-
    
-
    
2,744
    
2,503
  
Provision for losses on financing receivables
  
3,216
    
2,200
    
-
    
-
    
3,216
    
2,200
  
Other costs and expenses
  
29,824
    
26,350
    
10,636
    
9,583
    
19,540
    
17,035
  
Minority interest in net earnings of
                                    
consolidated affiliates
  
634
    
635
    
445
    
454
    
189
    
181
  
Total costs and expenses
  
105,184
    
94,241
    
64,599
    
59,234
    
42,472
    
36,493
  
                                     
Earnings from continuing operations
                                    
before income taxes
  
18,978
    
16,298
    
17,669
    
15,217
    
10,368
    
8,424
  
Provision for income taxes
  
(3,322
)
  
(2,880
)
  
(2,013
)
  
(1,799
)
  
(1,309
)
  
(1,081
)
Earnings from continuing operations
  
15,656
    
13,418
    
15,656
    
13,418
    
9,059
    
7,343
  
Earnings (loss) from discontinued operations,
                                    
net of taxes
  
(135
)
  
866
    
(135
)
  
866
    
(2,003
)
  
429
  
Net earnings
$
15,521
  
$
14,284
  
$
15,521
  
$
14,284
  
$
7,056
  
$
7,772
  
                                     
Per-share amounts
                                    
Per-share amounts - earnings from
                                    
continuing operations
                                    
Diluted earnings per share
$
1.53
  
$
1.29
                          
Basic earnings per share
$
1.53
  
$
1.29
                          
                                     
Per-share amounts - net earnings
                                    
Diluted earnings per share
$
1.51
  
$
1.37
                          
Basic earnings per share
$
1.52
  
$
1.38
                          
                                     
Dividends declared per share
$
0.84
  
$
0.75
                          

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.


Condensed Statement of Financial Position
General Electric Company and consolidated affiliates
 
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions; except share amounts)
9/30/07
  
12/31/06
  
9/30/07
  
12/31/06
  
9/30/07
  
12/31/06
  
                                     
Cash and equivalents
$
19,848
  
$
14,099
  
$
7,232
  
$
4,480
  
$
12,760
  
$
12,452
  
Investment securities
  
45,209
    
47,806
    
438
    
342
    
44,780
    
47,472
  
Current receivables
  
12,705
    
12,200
    
13,033
    
12,524
    
-
    
-
  
Inventories
  
13,319
    
10,029
    
13,250
    
9,975
    
69
    
54
  
Financing receivables - net
  
361,684
    
328,562
    
-
    
-
    
361,684
    
328,589
  
Other GECS receivables
  
16,703
    
16,903
    
-
    
-
    
21,530
    
21,690
  
Property, plant and equipment (including
                                    
equipment leased to others) - net
  
76,292
    
70,650
    
13,523
    
12,675
    
62,769
    
57,975
  
Investment in GECS
  
-
    
-
    
56,194
    
54,097
    
-
    
-
  
Intangible assets - net
  
94,317
    
84,314
    
65,267
    
58,384
    
29,050
    
25,930
  
All other assets
  
114,257
    
92,212
    
36,086
    
34,003
    
79,500
    
59,387
  
Assets of discontinued operations
  
7,372
    
19,757
    
-
    
8,638
    
7,372
    
11,119
  
Total assets
$
761,706
  
$
696,532
  
$
205,023
  
$
195,118
  
$
619,514
  
$
564,668
  
                                     
Short-term borrowings
$
180,403
  
$
172,013
  
$
3,540
  
$
2,076
  
$
177,508
  
$
173,313
  
Accounts payable, principally trade accounts
  
18,716
    
20,632
    
10,352
    
10,969
    
12,685
    
13,803
  
Progress collections and price adjustments accrued
  
8,570
    
5,248
    
8,570
    
5,248
    
-
    
-
  
Other GE current liabilities
  
19,954
    
20,822
    
19,954
    
20,822
    
-
    
-
  
Long-term borrowings
  
311,220
    
260,752
    
9,087
    
9,043
    
303,424
    
252,953
  
Investment contracts, insurance liabilities
                                    
and insurance annuity benefits
  
34,074
    
34,501
    
-
    
-
    
34,408
    
34,807
  
All other liabilities
  
55,363
    
46,261
    
33,352
    
25,681
    
22,057
    
20,691
  
Deferred income taxes
  
10,758
    
14,325
    
927
    
1,755
    
9,831
    
12,570
  
Liabilities of discontinued operations
  
2,309
    
2,626
    
193
    
2,121
    
2,116
    
485
  
Total liabilities
  
641,367
    
577,180
    
85,975
    
77,715
    
562,029
    
508,622
  
                                     
Minority interest in equity of consolidated affiliates
  
7,508
    
7,493
    
6,217
    
5,544
    
1,291
    
1,949
  
Common stock (10,106,209,000 and 10,277,373,000
                                    
shares outstanding at September 30, 2007 and
                                    
December 31, 2006, respectively)
  
669
    
669
    
669
    
669
    
1
    
1
  
Accumulated gains (losses) - net
                                    
Investment securities
  
452
    
1,608
    
452
    
1,608
    
380
    
1,594
  
Currency translation adjustments
  
9,904
    
6,181
    
9,904
    
6,181
    
7,256
    
4,837
  
Cash flow hedges
  
(189
)
  
(129
)
  
(189
)
  
(129
)
  
(258
)
  
(171
)
Benefit plans
  
(5,931
)
  
(4,406
)
  
(5,931
)
  
(4,406
)
  
(262
)
  
(278
)
Other capital
  
25,923
    
25,486
    
25,923
    
25,486
    
12,550
    
12,537
  
Retained earnings
  
114,139
    
107,343
    
114,139
    
107,343
    
36,527
    
35,577
  
Less common stock held in treasury
  
(32,136
)
  
(24,893
)
  
(32,136
)
  
(24,893
)
  
-
    
-
  
                                     
Total shareowners’ equity
  
112,831
    
111,859
    
112,831
    
111,859
    
56,194
    
54,097
  
                                     
Total liabilities and equity
$
761,706
  
$
696,532
  
$
205,023
  
$
195,118
  
$
619,514
  
$
564,668
  

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 $4,236 million and $3,254 million at September 30, 2007, and December 31, 2006, respectively.
 
See notes to condensed, consolidated financial statements. Separate information is shown for “GE” and “Financial Services (GECS).” September 30, 2007, data are unaudited. Transactions between GE and GECS have been eliminated from the “Consolidated” columns.
 


Condensed Statement of Cash Flows
General Electric Company and consolidated affiliates
 
 
Nine months ended September 30 (Unaudited)
  
 
Consolidated
  
GE
  
Financial
Services (GECS)
  
(In millions)
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
                                     
Cash flows - operating activities
                                    
Net earnings
$
15,521
  
$
14,284
  
$
15,521
  
$
14,284
  
$
7,056
  
$
7,772
  
Loss (earnings) from discontinued operations
  
135
    
(866
)
  
(1,868
)
  
(437
)
  
2,003
    
(429
)
Adjustments to reconcile net earnings to cash
                                    
provided from operating activities
                                    
Depreciation and amortization of property,
                                    
plant and equipment
  
7,432
    
6,159
    
1,577
    
1,442
    
5,855
    
4,717
  
Net earnings retained by GECS
  
-
    
-
    
(1,185
)
  
899
    
-
    
-
  
Deferred income taxes
  
778
    
1,299
    
239
    
711
    
539
    
588
  
Decrease (increase) in GE current receivables
  
(230
)
  
74
    
406
    
2,189
    
-
    
-
  
Increase in inventories
  
(1,963
)
  
(1,768
)
  
(1,959
)
  
(1,752
)
  
(4
)
  
(16
)
Decrease in accounts payable
  
(1,979
)
  
(1,582
)
  
(1,071
)
  
(494
)
  
(611
)
  
(739
)
Increase in GE progress collections
  
2,805
    
469
    
2,805
    
469
    
-
    
-
  
Provision for losses on GECS financing receivables
  
3,216
    
2,200
    
-
    
-
    
3,216
    
2,200
  
All other operating activities
  
(963
)
  
(127
)
  
2,202
    
348
    
(3,039
)
  
228
  
Cash from operating activities - continuing operations
  
24,752
    
20,142
    
16,667
    
17,659
    
15,015
    
14,321
  
Cash from (used for) operating activities - discontinued operations
  
3,917
    
1,554
    
(856
)
  
826
    
4,773
    
728
  
Cash from operating activities
  
28,669
    
21,696
    
15,811
    
18,485
    
19,788
    
15,049
  
                                     
Cash flows - investing activities
                                    
Additions to property, plant and equipment
  
(12,195
)
  
(10,470
)
  
(2,025
)
  
(2,020
)
  
(10,335
)
  
(8,588
)
Dispositions of property, plant and equipment
  
7,228
    
4,426
    
-
    
-
    
7,228
    
4,426
  
Net increase in GECS financing receivables
  
(24,675
)
  
(21,749
)
  
-
    
-
    
(24,535
)
  
(23,756
)
Payments for principal businesses purchased
  
(14,910
)
  
(10,888
)
  
(7,388
)
  
(3,990
)
  
(7,522
)
  
(6,898
)
Proceeds from sales of discontinued operations
  
11,457
    
8,112
    
10,826
    
-
    
-
    
8,112
  
Proceeds from principal business dispositions
  
2,114
    
1,090
    
1,012
    
1,090
    
1,102
    
-
  
All other investing activities
  
(7,643
)
  
(1,346
)
  
(2,108
)
  
641
    
(5,441
)
  
(3,144
)
Cash from (used for) investing activities - continuing operations
  
(38,624
)
  
(30,825
)
  
317
    
(4,279
)
  
(39,503
)
  
(29,848
)
Cash from (used for) investing activities - discontinued operations
  
(3,805
)
  
(4,068
)
  
1,002
    
(833
)
  
(4,807
)
  
(3,235
)
Cash from (used for) investing activities
  
(42,429
)
  
(34,893
)
  
1,319
    
(5,112
)
  
(44,310
)
  
(33,083
)
                                     
Cash flows - financing activities
                                    
Net increase (decrease) in borrowings (maturities of 90 days or less)
  
(8,087
)
  
596
    
(2,853
)
  
1,588
    
(8,467
)
  
(1,083
)
Newly issued debt (maturities longer than 90 days)
  
81,448
    
60,745
    
4,663
    
88
    
76,832
    
60,665
  
Repayments and other reductions (maturities longer than 90 days)
  
(36,801
)
  
(29,754
)
  
(171
)
  
(111
)
  
(36,630
)
  
(29,643
)
Net purchases of GE treasury shares
  
(7,220
)
  
(7,390
)
  
(7,220
)
  
(7,390
)
  
-
    
-
  
Dividends paid to shareowners
  
(8,651
)
  
(7,831
)
  
(8,651
)
  
(7,831
)
  
(5,871
)
  
(8,671
)
All other financing activities
  
(1,068
)
  
(747
)
  
-
    
-
    
(1,068
)
  
(747
)
Cash from (used for) financing activities - continuing operations
  
19,621
    
15,619
    
(14,232
)
  
(13,656
)
  
24,796
    
20,521
  
Cash from (used for) financing activities - discontinued operations
  
(149
)
  
(256
)
  
(146
)
  
7
    
(3
)
  
(263
)
Cash from (used for) financing activities
  
19,472
    
15,363
    
(14,378
)
  
(13,649
)
  
24,793
    
20,258
  
                                     
Increase (decrease) in cash and equivalents
  
5,712
    
2,166
    
2,752
    
(276
)
  
271
    
2,224
  
Cash and equivalents at beginning of year
  
14,276
    
11,801
    
4,480
    
2,015
    
12,629
    
10,106
  
Cash and equivalents at September 30
  
19,988
    
13,967
    
7,232
    
1,739
    
12,900
    
12,330
  
Less cash and equivalents of discontinued operations at September 30
  
140
    
369
    
-
    
-
    
140
    
369
  
Cash and equivalents of continuing operations at September 30
$
19,848
  
$
13,598
  
$
7,232
  
$
1,739
  
$
12,760
  
$
11,961
  

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.



Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended
September 30 (Unaudited)
  
Nine months ended
September 30 (Unaudited)
  
(In millions)
2007
  
2006
  
2007
  
2006
  
                         
Revenues
                        
Infrastructure
$
14,451
  
$
12,113
  
$
40,587
  
$
33,578
  
Commercial Finance
  
7,032
    
6,006
    
19,698
    
17,017
  
GE Money
  
6,207
    
5,064
    
18,441
    
14,408
  
Healthcare
  
4,062
    
3,891
    
12,002
    
11,860
  
NBC Universal
  
3,756
    
3,631
    
10,865
    
11,971
  
Industrial
  
6,229
    
6,256
    
18,285
    
18,696
  
Total segment revenues
  
41,737
    
36,961
    
119,878
    
107,530
  
Corporate items and eliminations
  
797
    
913
    
4,284
    
3,009
  
Consolidated revenues
$
42,534
  
$
37,874
  
$
124,162
  
$
110,539
  
                         
Segment profit (a)
                        
Infrastructure
$
2,615
  
$
2,339
  
$
7,386
  
$
6,131
  
Commercial Finance
  
1,450
    
1,290
    
4,121
    
3,521
  
GE Money
  
942
    
830
    
3,323
    
2,369
  
Healthcare
  
692
    
699
    
2,021
    
2,059
  
NBC Universal
  
589
    
542
    
2,184
    
2,078
  
Industrial
  
513
    
485
    
1,365
    
1,307
  
Total segment profit
  
6,801
    
6,185
    
20,400
    
17,465
  
Corporate items and eliminations
  
(618
)
  
(371
)
  
(1,303
)
  
(993
)
GE interest and other financial charges
  
(473
)
  
(467
)
  
(1,428
)
  
(1,255
)
GE provision for income taxes
  
(624
)
  
(598
)
  
(2,013
)
  
(1,799
)
Earnings from continuing operations
  
5,086
    
4,749
    
15,656
    
13,418
  
Earnings (loss) from discontinued operations,
                        
net of taxes
  
453
    
117
    
(135
)
  
866
  
Consolidated net earnings
$
5,539
  
$
4,866
  
$
15,521
  
$
14,284
  
                         

(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 also 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 also refer to as “net earnings,” for Commercial Finance, GE Money, and the financial services businesses of the Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance) and the Industrial segment (Equipment Services).

 


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, 2006. 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 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.
 
As disclosed in our report on Form 8-K filed on October 12, 2007, we have concluded that the following policies and practices resulted in revenue being recorded in incorrect periods. For certain product sales, principally in our Healthcare, Infrastructure and Industrial segments, we recorded revenues upon shipment before risk of loss for damage in transit had been transferred to the customer. Separately, in our Aviation business, for certain long-term agreements that provide for product repair and maintenance services on GE-manufactured aircraft engines, our accounting procedures were incorrect with respect to the timing and amount of credits for certain used parts that were refurbished and reused or resold. We have made appropriate adjustments for these items in this report for prior-period financial information.
 
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 our Japanese personal loan business (Lake), 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) as discontinued operations. Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.
 


Planned Sale of Lake and WMC
 
As previously disclosed, in September 2007, we committed to a plan to sell our Japanese personal loan business (Lake). We made the decision to sell this business upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. We are actively pursuing a buyer and expect to complete the sale of this business by the end of the third quarter of 2008. In connection with this exit, we recorded an after-tax loss of $890 million in the third quarter of 2007, which represents the difference between the net book value of our Lake business and the projected sale price. In addition, we committed to a plan to sell our U.S. mortgage business (WMC), as a result of continued pressures in the U.S. subprime mortgage industry. In connection with this exit, we recorded an after-tax loss of $43 million in the third quarter of 2007, which represents the difference between the net book value of WMC and the projected sale price. Both businesses were previously reported in the GE Money segment.
 
Completed Sale of Plastics and Advanced Materials
 
In August 2007, we completed the sale of our Plastics business to Saudi Basic Industries Corporation for $11,577 million in cash. Also, during the fourth quarter of 2006, we sold our Advanced Materials business.
 
Completed Sale of Insurance Businesses
 
In 2006, we substantially completed our planned exit of our insurance businesses through the sale of the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions Corporation (GE Insurance Solutions) and the sale of GE Life, our U.K.-based life insurance operation, to Swiss Reinsurance Company (Swiss Re). Also during 2006, we completed the sale of our remaining 18% investment in Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations, through a secondary public offering.
 


Financial information for discontinued GE industrial operations is shown below.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2007
  
2006
  
2007
  
2006
  
                         
Operations
                        
Total revenues
$
1,001
  
$
2,283
  
$
4,286
  
$
6,808
  
                         
Earnings from discontinued operations before
                        
income taxes
$
28
  
$
141
  
$
238
  
$
534
  
Income tax benefit (expense)
  
61
    
(15
)
  
69
    
(97
)
Earnings from discontinued operations before
                        
disposal, net of taxes
$
89
  
$
126
  
$
307
  
$
437
  
                         
Disposal
                        
Gain on disposal before income taxes
$
2,554
  
$
-
  
$
2,363
  
$
-
  
Income tax expense
  
(843
)
  
-
    
(802
)
  
-
  
Gain on disposal, net of taxes
$
1,711
  
$
-
  
$
1,561
  
$
-
  
                         
Earnings from discontinued operations,
                        
net of taxes(a)
$
1,800
  
$
126
  
$
1,868
  
$
437
  
                         

(a)
The sum of GE industrial earnings from discontinued operations, net of taxes, and the corresponding amounts for GECS on page 11 are reported as GE earnings (loss) from discontinued operations, net of taxes, on the Condensed Statement of Earnings.

 
 
At
  
(In millions)
9/30/07
  
12/31/06
  
             
Assets
            
Inventories
$
-
  
$
1,447
  
Property, plant and equipment (including equipment leased to others) - net
  
-
    
4,063
  
Intangible assets - net
  
-
    
2,081
  
Other
  
-
    
1,047
  
Assets of discontinued operations
$
-
  
$
8,638
  

 
 
At
  
(In millions)
9/30/07
  
12/31/06
  
             
Liabilities
            
Accounts payable, principally trade accounts
$
-
  
$
944
  
Other GE current liabilities
  
32
    
594
  
Other
  
161
    
583
  
Liabilities of discontinued operations
$
193
  
$
2,121
  

 


Financial information for discontinued GECS operations is shown below.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2007
  
2006
  
2007
  
2006
  
                         
Operations
                        
Total revenues
$
(186
)
$
1,015
  
$
(468
)
$
5,711
  
                         
Earnings (loss) from discontinued operations before
                        
income taxes
$
(601
)
$
93
  
$
(1,928
)
$
677
  
Income tax benefit (expense)
  
175
    
(2
)
  
845
    
(109
)
Earnings (loss) from discontinued operations before
                        
disposal, net of taxes
$
(426
)
$
91
  
$
(1,083
)
$
568
  
                         
Disposal
                        
Loss on disposal before income taxes
$
(1,549
)
$
(163
)
$
(1,560
)
$
(152
)
Income tax benefit
  
628
    
63
    
640
    
13
  
Loss on disposal, net of taxes
$
(921
)
$
(100
)
$
(920
)
$
(139
)
                         
Earnings (loss) from discontinued operations,
                        
net of taxes
$
(1,347
)
$
(9
)
$
(2,003
)
$
429
  

 
 
At
  
(In millions)
9/30/07
  
12/31/06
  
             
Assets
            
Cash and equivalents
$
140
  
$
177
  
Financing receivables - net
  
5,330
    
5,643
  
All other assets
  
424
    
4,823
  
Other
  
1,478
    
476
  
Assets of discontinued operations
$
7,372
  
$
11,119
  

 
 
At
  
(In millions)
9/30/07
  
12/31/06
  
             
Liabilities
            
Liabilities of discontinued operations
$
2,116
  
$
485
  

 


4. GECS revenues from services are summarized in the following table.
 
 
Three months ended
September 30
  
Nine months ended
September 30
  
(In millions)
2007
  
2006
  
2007
  
2006
  
                         
Interest on loans
$
6,122
  
$
5,139
  
$
17,594
  
$
15,176
  
Equipment leased to others
  
3,754
    
3,410
    
11,207
    
9,477
  
Financing leases
  
1,136
    
1,176
    
3,489
    
3,203
  
Fees
  
1,257
    
990
    
3,801
    
3,003
  
Real estate investments
  
1,364
    
845
    
3,420
    
2,187
  
Investment income(a)
  
860
    
691
    
3,005
    
1,921
  
Premiums earned by insurance activities
  
583
    
536
    
1,653
    
1,512
  
Associated companies
  
663
    
541
    
1,678
    
1,470
  
Gross securitization gains
  
368
    
331
    
1,486
    
865
  
Other items
  
1,736
    
1,408
    
5,170
    
4,317
  
Total
$
17,843
  
$
15,067
  
$
52,503
  
$
43,131
  
                         

(a)
Included gain on sale of common stock in Swiss Re of $558 million during first quarter of 2007.

 
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 U.S. and non-U.S. pension plans with pension assets or obligations greater than $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 plans follows.
 
 
Principal Pension Plans
  
 
Three months ended
September 30
  
 Nine months ended
September 30
  
(In millions)
2007
  
2006
  
2007
  
2006
  
                         
Expected return on plan assets
$
(986
)
$
(953
)
$
(2,959
)
$
(2,858
)
Service cost for benefits earned
  
389
    
338
    
1,009
    
1,027
  
Interest cost on benefit obligation
  
599
    
576
    
1,810
    
1,728
  
Prior service cost
  
76
    
69
    
195
    
184
  
Net actuarial loss recognized
  
173
    
181
    
524
    
550
  
Cost of principal pension plans
$
251
  
$
211
  
$
579
  
$