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 June 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 9,948,028,000 shares of common stock with a par value of $0.06 per share outstanding at June 27, 2008.
 

 
(1)
 
 

General Electric Company
 
   
Page
Part I - Financial Information
    
     
Item 1. Financial Statements
    
Condensed Statement of Earnings
    
 
3
 
4
 
5
 
6
 
7
 
8
 
28
 
42
     
Part II - Other Information
    
     
 
43
 
44
 
45
 
46
 
47
 
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.
 

 
(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(a)
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
  
2008
    
2007
      
2008
    
2007
    
2008
    
2007
  
                                       
Sales of goods
$
17,387
  
$
14,761
    
$
16,956
  
$
14,832
  
$
528
  
$
28
  
Sales of services
  
10,712
    
9,288
      
10,890
    
9,437
    
–
    
–
  
Other income
  
574
    
1,424
      
667
    
1,512
    
–
    
–
  
GECS earnings from continuing operations
  
–
    
–
      
2,774
    
2,421
    
–
    
–
  
GECS revenues from services
  
18,218
    
16,911
      
–
    
–
    
18,555
    
17,207
  
Total revenues
  
46,891
    
42,384
      
31,287
    
28,202
    
19,083
    
17,235
  
                                       
Cost of goods sold
  
13,885
    
11,905
      
13,522
    
11,980
    
461
    
23
  
Cost of services sold
  
6,844
    
5,603
      
7,022
    
5,752
    
–
    
–
  
Interest and other financial charges
  
6,626
    
5,645
      
554
    
422
    
6,348
    
5,467
  
Investment contracts, insurance losses and
                                      
insurance annuity benefits
  
821
    
892
      
–
    
–
    
870
    
925
  
Provision for losses on financing receivables
  
1,490
    
1,057
      
–
    
–
    
1,490
    
1,057
  
Other costs and expenses
  
10,604
    
9,995
      
3,687
    
3,525
    
7,021
    
6,578
  
Minority interest in net earnings of
                                      
consolidated affiliates
  
184
    
221
      
127
    
179
    
57
    
42
  
Total costs and expenses
  
40,454
    
35,318
      
24,912
    
21,858
    
16,247
    
14,092
  
                                       
Earnings from continuing operations
                                      
before income taxes
  
6,437
    
7,066
      
6,375
    
6,344
    
2,836
    
3,143
  
Provision for income taxes
  
(1,043
)
  
(1,453
)
    
(981
)
  
(731
)
  
(62
)
  
(722
)
Earnings from continuing operations
  
5,394
    
5,613
      
5,394
    
5,613
    
2,774
    
2,421
  
Loss from discontinued operations,
                                      
net of taxes
  
(322
)
  
(231
)
    
(322
)
  
(231
)
  
(337
)
  
(255
)
Net earnings
$
5,072
  
$
5,382
    
$
5,072
  
$
5,382
  
$
2,437
  
$
2,166
  
                                       
Per-share amounts
                                      
Per-share amounts – earnings from
                                      
continuing operations
                                      
Diluted earnings per share
$
0.54
  
$
0.54
                            
Basic earnings per share
$
0.54
  
$
0.55
                            
                                       
Per-share amounts – net earnings
                                      
Diluted earnings per share
$
0.51
  
$
0.52
                            
Basic earnings per share
$
0.51
  
$
0.52
                            
                                       
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
 
 
Six months ended June 30 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial
Services (GECS)
  
(In millions; per-share amounts in dollars)
  
2008
    
2007
      
2008
    
2007
    
2008
    
2007
  
                                       
Sales of goods
$
32,168
  
$
27,998
    
$
31,403
  
$
28,102
  
$
895
  
$
60
  
Sales of services
  
20,253
    
17,566
      
20,629
    
17,855
    
–
    
–
  
Other income
  
1,149
    
1,935
      
1,325
    
2,086
    
–
    
–
  
GECS earnings from continuing operations
  
–
    
–
      
5,240
    
5,845
    
–
    
–
  
GECS revenues from services
  
35,594
    
34,085
      
–
    
–
    
36,271
    
34,660
  
Total revenues
  
89,164
    
81,584
      
58,597
    
53,888
    
37,166
    
34,720
  
                                       
Cost of goods sold
  
25,793
    
22,494
      
25,145
    
22,610
    
778
    
48
  
Cost of services sold
  
12,929
    
10,860
      
13,305
    
11,150
    
–
    
–
  
Interest and other financial charges
  
13,156
    
11,223
      
1,156
    
955
    
12,527
    
10,712
  
Investment contracts, insurance losses and
                                      
insurance annuity benefits
  
1,625
    
1,752
      
–
    
–
    
1,718
    
1,855
  
Provision for losses on financing receivables
  
2,849
    
1,993
      
–
    
–
    
2,849
    
1,993
  
Other costs and expenses
  
20,839
    
19,592
      
7,239
    
6,952
    
13,833
    
12,818
  
Minority interest in net earnings of
                                      
consolidated affiliates
  
346
    
444
      
258
    
309
    
88
    
135
  
Total costs and expenses
  
77,537
    
68,358
      
47,103
    
41,976
    
31,793
    
27,561
  
                                       
Earnings from continuing operations
                                      
before income taxes
  
11,627
    
13,226
      
11,494
    
11,912
    
5,373
    
7,159
  
Provision for income taxes
  
(1,872
)
  
(2,685
)
    
(1,739
)
  
(1,371
)
  
(133
)
  
(1,314
)
Earnings from continuing operations
  
9,755
    
10,541
      
9,755
    
10,541
    
5,240
    
5,845
  
Loss from discontinued operations,
                                      
net of taxes
  
(379
)
  
(588
)
    
(379
)
  
(588
)
  
(408
)
  
(656
)
Net earnings
$
9,376
  
$
9,953
    
$
9,376
  
$
9,953
  
$
4,832
  
$
5,189
  
                                       
Per-share amounts
                                      
Per-share amounts – earnings from
                                      
continuing operations
                                      
Diluted earnings per share
$
0.98
  
$
1.02
                            
Basic earnings per share
$
0.98
  
$
1.03
                            
                                       
Per-share amounts – net earnings
                                      
Diluted earnings per share
$
0.94
  
$
0.97
                            
Basic earnings per share
$
0.94
  
$
0.97
                            
                                       
Dividends declared per share
$
0.62
  
$
0.56
                            

(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)
June 30,
2008
  
December 31,
2007
    
June 30,
2008
  
December 31,
2007
  
June 30,
2008
  
December 31,
2007
  
 
(Unaudited)
   
      
(Unaudited)
   
  
   
(Unaudited)
   
    
                                       
Cash and equivalents
$
18,989
  
$
15,731
    
$
3,041
  
$
6,702
  
$
16,476
  
$
9,439
  
Investment securities
  
45,861
    
45,276
      
326
    
343
    
45,541
    
44,941
  
Current receivables
  
22,330
    
22,259
      
14,803
    
15,093
    
–
    
–
  
Inventories
  
15,012
    
12,897
      
14,930
    
12,834
    
82
    
63
  
Financing receivables – net
  
415,302
    
376,123
      
–
    
–
    
423,845
    
384,067
  
Other GECS receivables
  
16,205
    
16,514
      
–
    
–
    
21,789
    
22,078
  
Property, plant and equipment (including
                                      
equipment leased to others) – net
  
79,925
    
77,888
      
14,527
    
14,142
    
65,398
    
63,746
  
Investment in GECS
  
–
    
–
      
60,114
    
57,676
    
–
    
–
  
Goodwill
  
84,439
    
81,116
      
57,081
    
55,689
    
27,358
    
25,427
  
Other intangible assets – net
  
15,932
    
16,142
      
11,671
    
11,633
    
4,261
    
4,509
  
All other assets
  
124,417
    
122,844
      
43,470
    
40,608
    
82,511
    
83,388
  
Assets of discontinued operations
  
8,576
    
8,547
      
65
    
66
    
8,511
    
8,481
  
Total assets
$
846,988
  
$
795,337
    
$
220,028
  
$
214,786
  
$
695,772
  
$
646,139
  
                                       
Short-term borrowings
$
204,837
  
$
195,100
    
$
3,625
  
$
4,106
  
$
202,359
  
$
192,420
  
Accounts payable, principally trade accounts
  
22,278
    
21,338
      
11,391
    
11,120
    
15,946
    
14,714
  
Progress collections and price adjustments accrued
  
12,461
    
9,885
      
13,044
    
10,374
    
–
    
–
  
Other GE current liabilities
  
19,991
    
18,916
      
20,133
    
18,916
    
–
    
–
  
Long-term borrowings
  
351,264
    
319,013
      
10,059
    
11,656
    
342,488
    
308,502
  
Investment contracts, insurance liabilities
                                      
and insurance annuity benefits
  
34,298
    
34,068
      
–
    
–
    
34,685
    
34,359
  
All other liabilities
  
59,642
    
59,316
      
32,990
    
32,859
    
26,749
    
26,522
  
Deferred income taxes
  
12,708
    
12,490
      
3,545
    
3,391
    
9,163
    
9,099
  
Liabilities of discontinued operations
  
2,329
    
1,648
      
233
    
302
    
2,096
    
1,346
  
Total liabilities
  
719,808
    
671,774
      
95,020
    
92,724
    
633,486
    
586,962
  
                                       
Minority interest in equity of consolidated affiliates
  
8,794
    
8,004
      
6,622
    
6,503
    
2,172
    
1,501
  
Common stock (9,948,028,000 and 9,987,599,000
                                      
shares outstanding at June 30, 2008 and
                                      
December 31, 2007, respectively)
  
669
    
669
      
669
    
669
    
1
    
1
  
Accumulated gains (losses) – net
                                      
Investment securities
  
(1,204
)
  
124
      
(1,204
)
  
124
    
(1,204
)
  
110
  
Currency translation adjustments
  
12,112
    
10,708
      
12,112
    
10,708
    
8,268
    
7,472
  
Cash flow hedges
  
(546
)
  
(668
)
    
(546
)
  
(668
)
  
(608
)
  
(727
)
Benefit plans
  
(1,126
)
  
(1,840
)
    
(1,126
)
  
(1,840
)
  
(87
)
  
(105
)
Other capital
  
26,160
    
26,100
      
26,160
    
26,100
    
12,580
    
12,574
  
Retained earnings
  
120,537
    
117,362
      
120,537
    
117,362
    
41,164
    
38,351
  
Less common stock held in treasury
  
(38,216
)
  
(36,896
)
    
(38,216
)
  
(36,896
)
  
–
    
–
  
                                       
Total shareowners’ equity
  
118,386
    
115,559
      
118,386
    
115,559
    
60,114
    
57,676
  
                                       
Total liabilities and equity
$
846,988
  
$
795,337
    
$
220,028
  
$
214,786
  
$
695,772
  
$
646,139
  

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 $9,236 million and $8,324 million at June 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
 
 
Six months ended June 30 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial
Services (GECS)
  
(In millions)
  
2008
    
2007
  
  
  
2008
    
2007
    
2008
    
2007
  
                                       
Cash flows – operating activities
                                      
Net earnings
$
9,376
  
$
9,953
    
$
9,376
  
$
9,953
  
$
4,832
  
$
5,189
  
Loss from discontinued operations
  
379
    
588
      
379
    
588
    
408
    
656
  
Adjustments to reconcile net earnings to cash
                                      
provided from operating activities
                                      
Depreciation and amortization of property,
                                      
plant and equipment
  
5,356
    
4,851
      
1,089
    
994
    
4,267
    
3,857
  
Net earnings from continuing operations retained by GECS
  
–
    
–
      
(3,221
)
  
(1,213
)
  
–
    
–
  
Deferred income taxes
  
(326
)
  
697
      
(534
)
  
94
    
208
    
603
  
Decrease (increase) in GE current receivables
  
(842
)
  
736
      
110
    
1,599
    
–
    
–
  
Decrease (increase) in inventories
  
(1,949
)
  
(1,408
)
    
(1,930
)
  
(1,379
)
  
(19
)
  
10
  
Increase (decrease) in accounts payable
  
1,003
    
(485
)
    
477
    
(573
)
  
1,089
    
278
  
Increase in GE progress collections
  
2,776
    
1,758
      
2,866
    
1,601
    
–
    
–
  
Provision for losses on GECS financing receivables
  
2,849
    
1,993
      
–
    
–
    
2,849
    
1,993
  
All other operating activities
  
(1,020
)
  
(3,728
)
    
680
    
(105
)
  
(1,868
)
  
(3,482
)
Cash from operating activities – continuing operations
  
17,602
    
14,955
      
9,292
    
11,559
    
11,766
    
9,104
  
Cash from (used for) operating activities – discontinued operations
  
488
    
3,405
      
(9
)
  
(54
)
  
497
    
3,739
  
Cash from operating activities
  
18,090
    
18,360
      
9,283
    
11,505
    
12,263
    
12,843
  
                                       
Cash flows – investing activities
                                      
Additions to property, plant and equipment
  
(8,064
)
  
(8,935
)
    
(1,640
)
  
(1,569
)
  
(6,599
)
  
(7,496
)
Dispositions of property, plant and equipment
  
5,325
    
4,795
      
–
    
–
    
5,325
    
4,795
  
Net increase in GECS financing receivables
  
(23,770
)
  
(10,969
)
    
–
    
–
    
(24,781
)
  
(11,673
)
Proceeds from sale of discontinued operations
  
203
    
–
      
203
    
–
    
–
    
–
  
Proceeds from principal business dispositions
  
4,346
    
2,114
      
(76
)
  
1,012
    
4,422
    
1,102
  
Payments for principal businesses purchased
  
(14,678
)
  
(13,185
)
    
(1,916
)
  
(7,356
)
  
(12,762
)
  
(5,829
)
All other investing activities
  
(3,366
)
  
(285
)
    
212
    
(622
)
  
(3,571
)
  
65
  
Cash used for investing activities – continuing operations
  
(40,004
)
  
(26,465
)
    
(3,217
)
  
(8,535
)
  
(37,966
)
  
(19,036
)
Cash from (used for) investing activities – discontinued operations
  
(453
)
  
(3,291
)
    
–
    
178
    
(453
)
  
(3,749
)
Cash used for investing activities
  
(40,457
)
  
(29,756
)
    
(3,217
)
  
(8,357
)
  
(38,419
)
  
(22,785
)
                                       
Cash flows – financing activities
                                      
Net increase (decrease) in borrowings (maturities of
                                      
90 days or less)
  
7,001
    
(6,883
)
    
(2,015
)
  
(2,805
)
  
8,737
    
(6,622
)
Newly issued debt (maturities longer than 90 days)
  
61,355
    
52,369
      
98
    
4,679
    
61,396
    
47,739
  
Repayments and other reductions (maturities longer
                                      
than 90 days)
  
(34,766
)
  
(24,648
)
    
(52
)
  
(125
)
  
(34,714
)
  
(24,523
)
Net purchases of GE shares for treasury
  
(1,543
)
  
(1,392
)
    
(1,543
)
  
(1,392
)
  
–
    
–
  
Dividends paid to shareowners
  
(6,215
)
  
(5,768
)
    
(6,215
)
  
(5,768
)
  
(2,019
)
  
(4,632
)
All other financing activities
  
(163
)
  
(579
)
    
–
    
–
    
(163
)
  
(579
)
Cash from (used for) financing activities – continuing operations
  
25,669
    
13,099
      
(9,727
)
  
(5,411
)
  
33,237
    
11,383
  
Cash used for financing activities – discontinued operations
  
(5
)
  
(128
)
    
–
    
(124
)
  
(5
)
  
(4
)
Cash from (used for) financing activities
  
25,664
    
12,971
      
(9,727
)
  
(5,535
)
  
33,232
    
11,379
  
Increase (decrease) in cash and equivalents
  
3,297
    
1,575
      
(3,661
)
  
(2,387
)
  
7,076
    
1,437
  
Cash and equivalents at beginning of year
  
16,031
    
14,275
      
6,702
    
4,480
    
9,739
    
12,629
  
Cash and equivalents at June 30
  
19,328
    
15,850
      
3,041
    
2,093
    
16,815
    
14,066
  
Less cash and equivalents of discontinued operations at June 30
  
339
    
176
      
–
    
–
    
339
    
176
  
Cash and equivalents of continuing operations at June 30
$
18,989
  
$
15,674
    
$
3,041
  
$
2,093
  
$
16,476
  
$
13,890
  

(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 16.

 
(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)
2008
  
2007
  
2008
  
2007
  
                         
Revenues
                        
Infrastructure
$
17,552
  
$
13,934
  
$
32,512
  
$
26,136
  
Commercial Finance
  
9,259
    
8,138
    
17,825
    
16,169
  
GE Money
  
6,629
    
6,276
    
13,037
    
12,234
  
Healthcare
  
4,491
    
4,045
    
8,378
    
7,940
  
NBC Universal
  
3,882
    
3,625
    
7,466
    
7,109
  
Industrial Products(a)
  
4,542
    
4,467
    
8,652
    
8,556
  
Total segment revenues
  
46,355
    
40,485
    
87,870
    
78,144
  
Corporate items and eliminations
  
536
    
1,899
    
1,294
    
3,440
  
Consolidated revenues
$
46,891
  
$
42,384
  
$
89,164
  
$
81,584
  
                         
Segment profit(b)
                        
Infrastructure
$
3,174
  
$
2,563
  
$
5,762
  
$
4,771
  
Commercial Finance
  
1,390
    
1,304
    
2,548
    
2,744
  
GE Money
  
1,056
    
1,158
    
2,051
    
2,381
  
Healthcare
  
747
    
692
    
1,275
    
1,329
  
NBC Universal
  
909
    
904
    
1,621
    
1,595
  
Industrial Products(a)
  
300
    
444
    
600
    
802
  
Total segment profit
  
7,576
    
7,065
    
13,857
    
13,622
  
Corporate items and eliminations
  
(647
)
  
(299
)
  
(1,207
)
  
(755
)
GE interest and other financial charges
  
(554
)
  
(422
)
  
(1,156
)
  
(955
)
GE provision for income taxes
  
(981
)
  
(731
)
  
(1,739
)
  
(1,371
)
Earnings from continuing operations
  
5,394
    
5,613
    
9,755
    
10,541
  
Loss from discontinued operations,
                        
net of taxes
  
(322
)
  
(231
)
  
(379
)
  
(588
)
Consolidated net earnings
$
5,072
  
$
5,382
  
$
9,376
  
$
9,953
  
                         

(a)
Formerly known as Industrial.
(b)
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 Healthcare, NBC Universal, Industrial Products and the industrial businesses of the Infrastructure segment; included in determining segment profit, which we sometimes 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).
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 included in the Annual Report on Form 10-K for the year ended December 31, 2007, which discusses our 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. GE includes Healthcare, NBC Universal, Industrial Products and the industrial businesses of Infrastructure. GECS includes Commercial Finance, GE Money, and the financial services businesses of Infrastructure (Aviation Financial Services, Energy Financial Services and Transportation 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 included in our Annual Report on Form 10-K for the year ended December 31, 2007 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.
 

 
(8)
 
 

Sales of goods in the Industrial Products segment typically do not include multiple product and/or service elements. In contrast, sales of goods in the Infrastructure and Healthcare 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.
 
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 segment, 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.
 

 
(9)
 
 

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.
 
We sell product services under long-term agreements in our Infrastructure segment, principally 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 Infrastructure 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 13 to the condensed, consolidated financial statements.
 

 
(10)
 
 

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 latest shareowners’ Annual Report on Form 10-K. 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.
 
GE Money Japan
 
In September 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 expect to complete the sale by the end of the third quarter of 2008, subject to regulatory approval and closing conditions. In connection with this agreement, and primarily related to our Japanese mortgage and card businesses, we recorded an incremental $233 million impairment loss in the second quarter of 2008. GE Money Japan revenues from discontinued operations were $209 million and $276 million in the second quarters of 2008 and 2007, respectively, and $454 million and $578 million in the first six months of 2008 and 2007, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $311 million and $50 million in the second quarters of 2008 and 2007, respectively, and $358 million and $69 million in the first six months of 2008 and 2007, respectively.
 

 
(11)
 
 

WMC
 
In December 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 $280 million and $232 million at June 30, 2008 and March 31, 2008, respectively. WMC revenues from discontinued operations were $(62) million and $(407) million in the second quarters of 2008 and 2007, respectively, and $(57) million and $(860) million in the first six months of 2008 and 2007, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $20 million and $204 million in the second quarters of 2008 and 2007, respectively, and $27 million and $584 million in the first six months of 2008 and 2007, respectively.
 
Plastics and Advanced Materials
 
In August 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 $1,691 million in the second quarter of 2007 and $3,285 million in the first six months of 2007. In total, Plastics and Advanced Materials earnings from discontinued operations, net of taxes, were $15 million and $24 million in the second quarters of 2008 and 2007, respectively, and $29 million and $68 million in the first six months of 2008 and 2007, respectively.
 
Insurance
 
In total, losses from insurance-related discontinued operations, net of taxes, were $6 million and $1 million in the second quarters of 2008 and 2007, respectively, and $23 million and $3 million in the first six months of 2008 and 2007, respectively.
 

 
(12)
 
 

Summarized financial information for discontinued GE industrial operations is shown below.
 
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Operations
                        
Total revenues
$
–
  
$
1,691
  
$
–
  
$
3,285
  
                         
Earnings (loss) from discontinued operations
                        
before income taxes
$
(10
)
$
152
  
$
(10
)
$
210
  
Income tax benefit (expense)
  
20
    
(5
)
  
20
    
8
  
Earnings from discontinued operations before
                        
disposal, net of taxes
$
10
  
$
147
  
$
10
  
$
218
  
                         
Disposal
                        
Gain (loss) on disposal before income taxes
$
5
  
$
(156
)
$
19
  
$
(191
)
Income tax benefit
  
–
    
33
    
–
    
41
  
Gain (loss) on disposal, net of taxes
$
5
  
$
(123
)
$
19
  
$
(150
)
                         
Earnings from discontinued operations, net of taxes(a)
$
15
  
$
24
  
$
29
  
$
68
  
                         

(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 loss from discontinued operations, net of taxes, on the Condensed Statement of Earnings.

 
Assets of GE industrial discontinued operations were $65 million at June 30, 2008, and $66 million at December 31, 2007. Liabilities of GE industrial discontinued operations were $233 million and $302 million at June 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
June 30
  
Six months ended
June 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Operations
                        
Total revenues
$
147
  
$
(131
)
$
397
  
$
(282
)
                         
Loss from discontinued operations before
                        
income taxes
$
(196
)
$
(651
)
$
(296
)
$
(1,327
)
Income tax benefit
  
91
    
395
    
120
    
670
  
Loss from discontinued operations, net of taxes
$
(105
)
$
(256
)
$
(176
)
$
(657
)
                         
Disposal
                        
Loss on disposal before income taxes
$
(222
)
$
(11
)
$
(222
)
$
(11
)
Income tax benefit (expense)
  
(10
)
  
12
    
(10
)
  
12
  
Gain (loss) on disposal, net of taxes
$
(232
)
$
1
  
$
(232
)
$
1
  
                         
Loss from discontinued operations, net of taxes
$
(337
)
$
(255
)
$
(408
)
$
(656
)

 

 
(13)
 
 

During the second quarter of 2008, we increased our assets of discontinued operations at June 30, 2008, and December 31, 2007 by $2,172 million and $1,778 million, respectively. These increases related to the inclusion of our Japanese mortgage and card businesses in discontinued operations.
 
 
At
 (In millions)
June 30,
2008
  
December 31,
2007
             
Assets
            
Cash and equivalents
$
339
  
$
300
  
Financing receivables – net
  
6,875
    
6,675
  
Other
  
1,297
    
1,506
  
Assets of discontinued operations
$
8,511
  
$
8,481
  

 
 
At
 (In millions)
June 30,
2008
  
December 31,
2007
             
Liabilities
            
Liabilities of discontinued operations
$
2,096
  
$
1,346
  

 
Assets and liabilities at June 30, 2008, and December 31, 2007, primarily comprised our GE Money Japan business.
 
4. GECS Revenues from Services
 
GECS revenues from services are summarized in the following table.
 
 
Three months ended
June 30
  
Six months ended
June 30
  
(In millions)
2008
  
2007
  
2008
  
2007
  
                         
Interest on loans
$
6,777
  
$
5,826
  
$
13,319
  
$
11,472
  
Equipment leased to others
  
3,909
    
3,690
    
7,719
    
7,453
  
Fees
  
1,448
    
1,709
    
2,814
    
3,218
  
Investment income(a)
  
1,061
    
903
    
1,959
    
2,613
  
Financing leases
  
1,186
    
1,215
    
2,349
    
2,353
  
Real estate investments
  
1,138<