frm10q1q09.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 March 31, 2009
 
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 10,589,575,000 shares of common stock with a par value of $0.06 per share outstanding at March 27, 2009.



 
(1)
 

General Electric Company
 


   
Page
Part I – Financial Information
    
     
Item 1. Financial Statements
    
 
3
 
4
 
5
 
6
 
7
 
38
 
57
 
57
     
Part II – Other Information
    
     
 
58
 
58
 
59
 
60
 
61
 
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 financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; 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 March 31 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial Services (GECS)
  
(In millions; except share amounts)
2009
  
2008
    
2009
  
2008
  
2009
  
2008
  
                                       
Revenues
                                      
Sales of goods
$
14,072
  
$
14,781
    
$
13,813
  
$
14,447
  
$
273
  
$
367
  
Sales of services
  
10,055
    
9,541
      
10,209
    
9,739
    
–
    
–
  
Other income
  
428
    
575
      
479
    
658
    
–
    
–
  
GECS earnings from continuing operations
  
–
    
–
      
961
    
2,456
    
–
    
–
  
GECS revenues from services
  
13,856
    
17,331
      
–
    
–
    
14,157
    
17,671
  
Total revenues
  
38,411
    
42,228
      
25,462
    
27,300
    
14,430
    
18,038
  
                                       
Costs and expenses
                                      
Cost of goods sold
  
11,433
    
11,908
      
11,222
    
11,623
    
224
    
317
  
Cost of services sold
  
6,633
    
6,085
      
6,787
    
6,283
    
–
    
–
  
Interest and other financial charges
  
5,327
    
6,527
      
376
    
602
    
5,121
    
6,176
  
Investment contracts, insurance losses and
                                      
insurance annuity benefits
  
746
    
804
      
–
    
–
    
773
    
848
  
Provision for losses on financing receivables
  
2,336
    
1,343
      
–
    
–
    
2,336
    
1,343
  
Other costs and expenses
  
9,337
    
10,207
      
3,364
    
3,552
    
6,129
    
6,784
  
Total costs and expenses
  
35,812
    
36,874
      
21,749
    
22,060
    
14,583
    
15,468
  
                                       
Earnings (loss) from continuing operations
                                      
before income taxes
  
2,599
    
5,354
      
3,713
    
5,240
    
(153
)
  
2,570
  
Benefit (provision) for income taxes
  
318
    
(841
)
    
(842
)
  
(758
)
  
1,160
    
(83
)
Earnings from continuing operations
  
2,917
    
4,513
      
2,871
    
4,482
    
1,007
    
2,487
  
Loss from discontinued operations, net of taxes
  
(21
)
  
(47
)
    
(21
)
  
(47
)
  
(4
)
  
(61
)
Net earnings
  
2,896
    
4,466
      
2,850
    
4,435
    
1,003
    
2,426
  
Less net earnings attributable to noncontrolling interests
  
85
    
162
      
39
    
131
    
46
    
31
  
Net earnings attributable to the Company
  
2,811
    
4,304
      
2,811
    
4,304
    
957
    
2,395
  
Preferred stock dividends declared
  
(75
)
  
–
      
(75
)
  
–
    
–
    
–
  
Net earnings attributable to GE common
                                      
shareowners
$
2,736
  
$
4,304
    
$
2,736
  
$
4,304
  
$
957
  
$
2,395
  
                                       
                                       
Amounts attributable to the Company
                                      
Earnings from continuing operations
$
2,832
  
$
4,351
    
$
2,832
  
$
4,351
  
$
961
  
$
2,456
  
Loss from discontinued operations, net of taxes
  
(21
)
  
(47
)
    
(21
)
  
(47
)
  
(4
)
  
(61
)
Net earnings attributable to the Company
$
2,811
  
$
4,304
    
$
2,811
  
$
4,304
  
$
957
  
$
2,395
  
                                       
Per-share amounts
                                      
Earnings from continuing operations
                                      
Diluted earnings per share
$
0.26
  
$
0.43
                            
Basic earnings per share
$
0.26
  
$
0.44
                            
                                       
Net earnings
                                      
Diluted earnings per share
$
0.26
  
$
0.43
                            
Basic earnings per share
$
0.26
  
$
0.43
                            
                                       
Dividends declared per share
$
0.31
  
$
0.31
                            
                                       

(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 Financial Position
General Electric Company and consolidated affiliates
 
 
Consolidated
    
GE(a)
  
Financial Services (GECS)
  
(In millions; except share amounts)
March 31,
2009
  
December 31,
2008
    
March 31,
2009
  
December 31,
2008
  
March 31,
2009
  
December 31,
2008
  
 
(Unaudited)
        
(Unaudited)
      
(Unaudited)
      
                                       
Assets
                                      
Cash and equivalents
$
46,830
  
$
48,187
    
$
2,127
  
$
12,090
  
$
45,240
  
$
37,486
  
Investment securities
  
41,931
    
41,446
      
150
    
213
    
41,783
    
41,236
  
Current receivables
  
19,198
    
21,411
      
12,611
    
15,064
    
–
    
–
  
Inventories
  
13,831
    
13,674
      
13,766
    
13,597
    
65
    
77
  
Financing receivables – net
  
347,647
    
365,168
      
–
    
–
    
355,036
    
372,456
  
Other GECS receivables
  
13,182
    
13,439
      
–
    
–
    
17,728
    
18,636
  
Property, plant and equipment (including
                                      
equipment leased to others) – net
  
72,222
    
78,530
      
14,032
    
14,433
    
58,190
    
64,097
  
Investment in GECS
  
–
    
–
      
60,756
    
53,279
    
–
    
–
  
Goodwill
  
80,640
    
81,759
      
56,203
    
56,394
    
24,437
    
25,365
  
Other intangible assets – net
  
14,758
    
14,977
      
11,342
    
11,364
    
3,416
    
3,613
  
All other assets
  
109,040
    
106,899
      
22,219
    
22,435
    
88,180
    
85,721
  
Assets of businesses held for sale
  
–
    
10,556
      
–
    
–
    
–
    
10,556
  
Assets of discontinued operations
  
1,528
    
1,723
      
64
    
64
    
1,464
    
1,659
  
Total assets
$
760,807
  
$
797,769
    
$
193,270
  
$
198,933
  
$
635,539
  
$
660,902
  
                                       
Liabilities and equity
                                      
Short-term borrowings
$
176,320
  
$
193,695
    
$
1,614
  
$
2,375
  
$
175,676
  
$
193,533
  
Accounts payable, principally trade accounts
  
18,171
    
20,819
      
10,677
    
11,699
    
11,718
    
13,882
  
Progress collections and price adjustments
                                      
accrued
  
11,821
    
12,536
      
12,312
    
13,058
    
–
    
–
  
Other GE current liabilities
  
21,494
    
21,560
      
21,494
    
21,624
    
–
    
–
  
Long-term borrowings
  
327,658
    
330,067
      
11,171
    
9,827
    
317,412
    
321,068
  
Investment contracts, insurance liabilities
                                      
and insurance annuity benefits
  
33,437
    
34,032
      
–
    
–
    
33,946
    
34,369
  
All other liabilities
  
55,911
    
64,796
      
32,192
    
32,767
    
23,846
    
32,090
  
Deferred income taxes
  
5,179
    
4,584
      
(3,872
)
  
(3,949
)
  
9,051
    
8,533
  
Liabilities of businesses held for sale
  
–
    
636
      
–
    
–
    
–
    
636
  
Liabilities of discontinued operations
  
1,340
    
1,432
      
175
    
189
    
1,165
    
1,243
  
Total liabilities
  
651,331
    
684,157
      
85,763
    
87,590
    
572,814
    
605,354
  
                                       
Preferred stock (30,000 shares outstanding at
                                      
both March 31, 2009 and December 31, 2008)
  
–
    
–
      
–
    
–
    
–
    
–
  
Common stock (10,589,575,000 and 10,536,897,000
                                      
shares outstanding at March 31, 2009 and
                                      
December 31, 2008, respectively)
  
702
    
702
      
702
    
702
    
1
    
1
  
Accumulated other comprehensive income – net(b)
                                      
Investment securities
  
(3,729
)
  
(3,094
)
    
(3,729
)
  
(3,094
)
  
(3,733
)
  
(3,097
)
Currency translation adjustments
  
(4,359
)
  
(299
)
    
(4,359
)
  
(299
)
  
(4,307
)
  
(1,258
)
Cash flow hedges
  
(2,615
)
  
(3,332
)
    
(2,615
)
  
(3,332
)
  
(2,438
)
  
(3,134
)
Benefit plans
  
(14,889
)
  
(15,128
)
    
(14,889
)
  
(15,128
)
  
(359
)
  
(367
)
Other capital
  
39,150
    
40,390
      
39,150
    
40,390
    
27,580
    
18,079
  
Retained earnings
  
121,572
    
122,123
      
121,572
    
122,123
    
44,012
    
43,055
  
Less common stock held in treasury
  
(34,813
)
  
(36,697
)
    
(34,813
)
  
(36,697
)
  
–
    
–
  
                                       
Total GE shareowners’ equity
  
101,019
    
104,665
      
101,019
    
104,665
    
60,756
    
53,279
  
Noncontrolling interests(c)
  
8,457
    
8,947
      
6,488
    
6,678
    
1,969
    
2,269
  
Total equity
  
109,476
    
113,612
      
107,507
    
111,343
    
62,725
    
55,548
  
                                       
Total liabilities and equity
$
760,807
  
$
797,769
    
$
193,270
  
$
198,933
  
$
635,539
  
$
660,902
  
                                       

(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.
(b)
The sum of accumulated other comprehensive income – net was $(25,592) million and $(21,853) million at March 31, 2009 and December 31, 2008, respectively.
(c)
Included accumulated other comprehensive income attributable to noncontrolling interests of $119 million and $149 million at March 31, 2009 and December 31, 2008, respectively.
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 Cash Flows
General Electric Company and consolidated affiliates
 
 
Three months ended March 31 (Unaudited)
  
 
Consolidated
    
GE(a)
  
Financial Services (GECS)
  
(In millions)
2009
  
2008
    
2009
  
2008
  
2009
  
2008
  
                                       
Cash flows – operating activities
                                      
Net earnings attributable to the Company
$
2,811
  
$
4,304
    
$
2,811
  
$
4,304
  
$
957
  
$
2,395
  
Loss from discontinued operations
  
21
    
47
      
21
    
47
    
4
    
61
  
Adjustments to reconcile net earnings attributable to the
                                      
Company to cash provided from operating activities
                                      
Depreciation and amortization of property,
                                      
plant and equipment
  
2,731
    
2,682
      
550
    
556
    
2,181
    
2,126
  
Earnings from continuing operations retained
                                      
by GECS
  
–
    
–
      
(961
)
  
(1,326
)
  
–
    
–
  
Deferred income taxes
  
(528
)
  
(990
)
    
74
    
(352
)
  
(602
)
  
(638
)
Decrease in GE current receivables
  
1,952
    
106
      
2,225
    
396
    
–
    
–
  
Decrease (increase) in inventories
  
(178
)
  
(1,412
)
    
(170
)
  
(1,375
)
  
12
    
(6
)
Increase (decrease) in accounts payable
  
(1,672
)
  
369
      
(555
)
  
125
    
(1,655
)
  
271
  
Increase (decrease) in GE progress collections
  
(724
)
  
1,436
      
(755
)
  
1,553
    
–
    
–
  
Provision for losses on GECS financing receivables
  
2,336
    
1,343
      
–
    
–
    
2,336
    
1,343
  
All other operating activities
  
(7,168
)
  
(1,327
)
    
(401
)
  
926
    
(6,707
)
  
(2,217
)
Cash from (used for) operating activities – continuing
                                      
operations
  
(419
)
  
6,558
      
2,839
    
4,854
    
(3,474
)
  
3,335
  
Cash from (used for) operating activities – discontinued
                                      
operations
  
(45
)
  
367
      
–
    
–
    
(45
)
  
367
  
Cash from (used for) operating activities
  
(464
)
  
6,925
      
2,839
    
4,854
    
(3,519
)
  
3,702
  
                                       
Cash flows – investing activities
                                      
Additions to property, plant and equipment
  
(2,560
)
  
(3,718
)
    
(756
)
  
(894
)
  
(1,896
)
  
(2,955
)
Dispositions of property, plant and equipment
  
1,183
    
3,212
      
–
    
–
    
1,183
    
3,212
  
Net decrease (increase) in GECS financing receivables
  
18,024
    
(11,845
)
    
–
    
–
    
17,962
    
(12,448
)
Proceeds from sales of discontinued operations
  
–
    
203
      
–
    
203
    
–
    
–
  
Proceeds from principal business dispositions
  
9,021
    
4,305
      
175
    
–
    
8,846
    
4,305
  
Payments for principal businesses purchased
  
(7,128
)
  
(12,759
)
    
(306
)
  
(107
)
  
(6,822
)
  
(12,652
)
Capital contribution from GE to GECS
  
–
    
–
      
(9,500
)
  
–
    
–
    
–
  
All other investing activities
  
(2,691
)
  
(722
)
    
54
    
(35
)
  
(2,082
)
  
(375
)
Cash from (used for) investing activities – continuing
                                      
operations
  
15,849
    
(21,324
)
    
(10,333
)
  
(833
)
  
17,191
    
(20,913
)
Cash from (used for) investing activities – discontinued
                                      
operations
  
47
    
(358
)
    
–
    
–
    
47
    
(358
)
Cash from (used for) investing activities
  
15,896
    
(21,682
)
    
(10,333
)
  
(833
)
  
17,238
    
(21,271
)
                                       
Cash flows – financing activities
                                      
Net increase (decrease) in borrowings (maturities of
                                      
90 days or less)
  
(17,897
)
  
2,201
      
990
    
(1,658
)
  
(20,129
)
  
3,842
  
Newly issued debt (maturities longer than 90 days)
  
32,064
    
35,827
      
1,226
    
39
    
30,935
    
35,936
  
Repayments and other reductions (maturities longer
                                      
than 90 days)
  
(27,272
)
  
(20,239
)
    
(1,580
)
  
(46
)
  
(25,692
)
  
(20,193
)
Net dispositions (purchases) of GE shares for treasury
  
245
    
(864
)
    
245
    
(864
)
  
–
    
–
  
Dividends paid to shareowners
  
(3,350
)
  
(3,110
)
    
(3,350
)
  
(3,110
)
  
–
    
(1,130
)
Capital contribution from GE to GECS
  
–
    
–
      
–
    
–
    
9,500
    
–
  
All other financing activities
  
(577
)
  
498
      
–
    
–
    
(577
)
  
498
  
Cash from (used for) financing activities – continuing
                                      
operations
  
(16,787
)
  
14,313
      
(2,469
)
  
(5,639
)
  
(5,963
)
  
18,953
  
Cash from (used for) financing activities – discontinued
                                      
operations
  
–
    
–
      
–
    
–
    
–
    
–
  
Cash from (used for) financing activities
  
(16,787
)
  
14,313
      
(2,469
)
  
(5,639
)
  
(5,963
)
  
18,953
  
Increase (decrease) in cash and equivalents
  
(1,355
)
  
(444
)
    
(9,963
)
  
(1,618
)
  
7,756
    
1,384
  
Cash and equivalents at beginning of year
  
48,367
    
16,031
      
12,090
    
6,702
    
37,666
    
9,739
  
Cash and equivalents at March 31
  
47,012
    
15,587
      
2,127
    
5,084
    
45,422
    
11,123
  
Less cash and equivalents of discontinued operations
                                      
at March 31
  
182
    
309
      
–
    
–
    
182
    
309
  
Cash and equivalents of continuing operations
                                      
at March 31
$
46,830
  
$
15,278
    
$
2,127
  
$
5,084
  
$
45,240
  
$
10,814
  
                                       

(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 19.

 
(5)
 

Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended March 31
(Unaudited)
  
 (In millions)
2009
  
2008
  
             
Revenues
            
Energy Infrastructure
$
8,239
  
$
7,724
  
Technology Infrastructure
  
10,436
    
10,460
  
NBC Universal
  
3,524
    
3,584
  
Capital Finance
  
13,088
    
16,969
  
Consumer & Industrial
  
2,221
    
2,862
  
Total segment revenues
  
37,508
    
41,599
  
Corporate items and eliminations
  
903
    
629
  
Consolidated revenues
$
38,411
  
$
42,228
  
             
Segment profit(a)
            
Energy Infrastructure
$
1,273
  
$
1,070
  
Technology Infrastructure
  
1,803
    
1,701
  
NBC Universal
  
391
    
712
  
Capital Finance
  
1,119
    
2,679
  
Consumer & Industrial
  
36
    
144
  
Total segment profit
  
4,622
    
6,306
  
Corporate items and eliminations
  
(572
)
  
(595
)
GE interest and other financial charges
  
(376
)
  
(602
)
GE provision for income taxes
  
(842
)
  
(758
)
Earnings from continuing operations attributable to the Company
  
2,832
    
4,351
  
Loss from discontinued operations, net of taxes, attributable
            
to the Company
  
(21
)
  
(47
)
Consolidated net earnings attributable to the Company
$
2,811
  
$
4,304
  
             

(a)
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations, earnings attributable to noncontrolling interests 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 acquisitions or 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 Energy Infrastructure, Technology 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.

 

 
(6)
 

 
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 in our Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K), which discusses our consolidation and financial statement presentation. As used in this report on Form 10-Q (Report) and in our 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 Energy Infrastructure, Technology 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.
 
Accounting changes
 
Effective January 1, 2008, we adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. Effective January 1, 2009, we adopted SFAS 157 for all non-financial instruments accounted for at fair value on a non-recurring basis. SFAS 157 establishes a new framework for measuring fair value and expands related disclosures. See Note 15.
 
On January 1, 2009, we adopted SFAS 141(R), Business Combinations. This standard significantly changes the accounting for business acquisitions both during the period of the acquisition and in subsequent periods. Among the more significant changes in the accounting for acquisitions are the following:
 
·  
Acquired in-process research and development (IPR&D) is accounted for as an asset, with the cost recognized as the research and development is realized or abandoned. IPR&D was previously expensed at the time of the acquisition.
 
·  
Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in operations. Contingent consideration was previously accounted for as a subsequent adjustment of purchase price.
 
·  
Subsequent decreases in valuation allowances on acquired deferred tax assets are recognized in operations after the measurement period. Such changes were previously considered to be subsequent changes in consideration and were recorded as decreases in goodwill.
 
·  
Transaction costs are expensed. These costs were previously treated as costs of the acquisition.
 
In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which amends the accounting in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. The FSP is effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, the FSP requires measurement based on the recognition and measurement criteria of SFAS 5, Accounting for Contingencies.
 

 
(7)
 

On January 1, 2009, we adopted SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, which requires us to make certain changes to the presentation of our financial statements. This standard requires us to classify noncontrolling interests (previously referred to as “minority interest”) as part of consolidated net earnings ($85 million and $162 million for the three months ended March 31, 2009 and 2008, respectively) and to include the accumulated amount of noncontrolling interests as part of shareowners' equity ($8,457 million and $8,947 million at March 31, 2009 and December 31, 2008, respectively). The net earnings amounts we have previously reported are now presented as "Net earnings attributable to the Company" and, as required by SFAS 160, earnings per share continues to reflect amounts attributable only to the Company. Similarly, in our presentation of shareowners’ equity, we distinguish between equity amounts attributable to GE shareowners and amounts attributable to the noncontrolling interests – previously classified as minority interest outside of shareowners’ equity. In addition to these financial reporting changes, SFAS 160 provides for significant changes in accounting related to noncontrolling interests; specifically, increases and decreases in our controlling financial interests in consolidated subsidiaries will be reported in equity similar to treasury stock transactions. If a change in ownership of a consolidated subsidiary results in loss of control and deconsolidation, any retained ownership interests are remeasured with the gain or loss reported in net earnings.
 
Effective January 1, 2009, we adopted Emerging Issues Task Force (EITF) Issue 07-1, Accounting for Collaborative Arrangements, which requires gross basis presentation of revenues and expenses for principal participants in collaborative arrangements. Our Technology Infrastructure and Energy Infrastructure segments enter into collaborative arrangements with manufacturers and suppliers of components used to build and maintain certain engines, aero-derivatives, and turbines, under which GE and these participants share in risks and rewards of these product programs. Adoption of the standard had no effect as our historical presentation had been consistent with the new requirements. Participation fees earned and recorded as other income totaled an insignificant amount in the first quarter of 2009, and $451 million and $540 million for the years 2008 and 2007, respectively. Payments to participants are recorded as costs of services sold ($103 million in the first quarter of 2009, and $423 million and $320 million for the years 2008 and 2007, respectively) or as cost of goods sold ($439 million in the first quarter of 2009, and $1,932 million and $1,623 million for the years 2008 and 2007, respectively).
 
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 2008 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 comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd.), 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.
 

 
(8)
 

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 third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. As a result, we recognized an after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361 million. In connection with the transaction, GE Money Japan reduced the proceeds on the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale may be increased or decreased based on the actual claims experienced in accordance with terms specified in the agreement, and will not be adjusted unless claims exceed approximately $2,800 million. Estimated claims are not expected to exceed those levels and are based on our historical claims experience and the estimated future requests, taking into consideration the ability and likelihood of customers to make claims and other industry risk factors. However, uncertainties around the status of laws and regulations and lack of certain information related to the individual customers make it difficult to develop a meaningful estimate of the aggregate claims exposure. We review our estimated exposure quarterly, and make adjustments when required. To date, there have been no adjustments to sale proceeds for this matter. GE Money Japan revenues from discontinued operations were $1 million and $290 million in the first quarters of 2009 and 2008, respectively. In total, GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $4 million and $(37) million in the first quarters of 2009 and 2008, 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 $246 million at March 31, 2009, and $244 million at December 31, 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 $5 million in the first quarters of 2009 and 2008, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $6 million and $7 million in the first quarters of 2009 and 2008, respectively.
 
GE industrial earnings (loss) from discontinued operations, net of taxes, were $(17) million and $14 million in the first quarters of 2009 and 2008, respectively.
 

 
(9)
 

Assets of GE industrial discontinued operations were $64 million at both March 31, 2009 and December 31, 2008. Liabilities of GE industrial discontinued operations were $175 million and $189 million at March 31, 2009, and December 31, 2008, respectively, and primarily represent taxes payable and pension liabilities related to the sale of our Plastics business in 2007.
 
Summarized financial information for discontinued GECS operations is shown below.
 
 
Three months ended March 31
  
(In millions)
2009
  
2008
  
             
Operations
            
Total revenues
$
(6
)
$
295
  
             
Loss from discontinued operations before
            
income taxes
$
(12
)
$
(101
)
Income tax benefit
  
4
    
40
  
Loss from discontinued operations,
            
net of taxes
$
(8
)
$
(61
)
             
Disposal
            
Gain on disposal before income taxes
$
7
  
$
–
  
Income tax expense
  
(3
)
  
–
  
Gain on disposal, net of taxes
$
4
  
$
–
  
             
Loss from discontinued operations, net of taxes(a)
$
(4
)
$
(61
)
             

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

 
 
At
  
(In millions)
March 31,
2009
  
December 31,
2008
  
             
Assets
            
Cash and equivalents
$
182
  
$
180
  
All other assets
  
14
    
19
  
Other
  
1,268
    
1,460
  
Assets of discontinued operations
$
1,464
  
$
1,659
  

 
 
At
  
(In millions)
March 31,
2009
  
December 31,
2008
  
             
Liabilities
            
Liabilities of discontinued operations
$
1,165
  
$
1,243
  

 
Assets at March 31, 2009 and December 31, 2008, were primarily comprised of a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business.
 

 
(10)
 

4. GECS REVENUES FROM SERVICES
 
GECS revenues from services are summarized in the following table.
 
 
Three months ended March 31
  
(In millions)
2009
  
2008
  
             
Interest on loans
$
5,073
  
$
6,499
  
Equipment leased to others
  
3,485
    
3,810
  
Fees
  
1,160
    
1,369
  
Financing leases
  
908
    
1,163
  
Real estate investments
  
347
    
1,161
  
Premiums earned by insurance activities
  
510
    
542
  
Associated companies
  
165
    
469
  
Investment income(a)
  
665
    
842
  
Net securitization gains
  
326
    
386
  
Other items(b)
  
1,518
    
1,430
  
Total
$
14,157
  
$
17,671
  
             

(a)
Included other-than-temporary impairments on investment securities of $232 million and $162 million in the first quarters of 2009 and 2008, respectively.
(b)
Included a gain on the sale of a limited partnership interest in Penske Truck Leasing Co., L.P. (PTL) and a related gain on the remeasurement of the retained investment to fair value totaling $296 million in the first quarter of 2009. See Note 18.

 
5. POSTRETIREMENT BENEFIT PLANS
 
We sponsor a number of pension and retiree health and life insurance benefit plans. Principal pension plans include the GE Pension Plan and the GE Supplementary Pension Plan. Principal retiree benefit plans generally provide health and life insurance benefits to employees who retire under the GE Pension Plan with 10 or more years of service. Other pension plans include the U.S. and non-U.S. pension plans 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
  
Other Pension Plans
  
(In millions)
Three months ended March 31
  
Three months ended March 31
  
 
2009
  
2008
  
2009
  
2008
  
                         
Expected return on plan assets
$
(1,126
)
$
(1,075
)
$
(106
)
$
(137
)
Service cost for benefits earned
  
353
    
300
    
83
    
80
  
Interest cost on benefit obligation
  
669
    
661
    
112
    
124
  
Prior service cost amortization
  
81
    
81
    
2
    
3
  
Net actuarial loss amortization
  
90
    
54
    
29
    
19
  
Pension plans cost
$
67
  
$
21
  
$
120
  
$
89
  

 

 
(11)
 

The effect on operations of principal retiree health and life insurance plans follows.
 
 
Principal Retiree Health and
Life Insurance Plans
  
 
Three months ended March 31
  
 (In millions)
2009
  
2008
  
             
Expected return on plan assets
$
(32
)
$
(33
)
Service cost for benefits earned
  
74
    
63
  
Interest cost on benefit obligation
  
177
    
198
  
Prior service cost amortization
  
168
    
168
  
Net actuarial loss (gain) amortization
  
(27
)
  
9
  
Retiree benefit plans cost
$
360
  
$
405
  

 
6. INCOME TAXES
 
During the first quarter of 2009, following the change in our external credit ratings, funding actions taken and review of our operations, liquidity and funding, we determined that undistributed prior-year earnings of non-U.S. subsidiaries of GECS, on which we had previously provided deferred U.S. taxes, would be indefinitely reinvested outside the U.S. This change increased the amount of prior-year earnings indefinitely reinvested outside the U.S. by approximately $2 billion (to $77 billion), resulting in an income tax benefit of $700 million. Under applicable accounting rules, this tax benefit is recorded entirely in the first quarter tax provision and will not affect the tax provision for future quarters of 2009.
 
The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months, were:
 
 
At
  
(In millions)
March 31,
2009
  
December 31,
2008
  
             
Unrecognized tax benefits
$
6,819
  
$
6,692
  
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
4,766
    
4,453
  
Accrued interest on unrecognized tax benefits
  
1,271
    
1,204
  
Accrued penalties on unrecognized tax benefits
  
90
    
96
  
Reasonably possible reduction to the balance of unrecognized tax benefits
            
in succeeding 12 months
  
0-1,600
    
0-1,500
  
Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
0-1,350
    
0-1,100
  
             

(a)
Some portion of such reduction might be reported as discontinued operations.

 
The IRS is currently auditing our consolidated income tax returns for 2003-2007. In addition, certain other U.S. tax deficiency issues and refund claims for previous years remain unresolved. It is reasonably possible that the 2003-2005 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of unrecognized tax benefits. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.
 
GE and GECS file a consolidated U.S. federal income tax return. The GECS provision for current tax expense includes its effect on the consolidated return. The effect of GECS on the consolidated liability is settled in cash as GE tax payments are due.
 

 
(12)
 

7. EARNINGS PER SHARE INFORMATION
 
GE’s authorized common stock consists of 13,200,000,000 shares having a par value of $0.06 each. Information related to the calculation of earnings per share follows.
 
 
Three months ended March 31
  
 
2009(a)
  
2008
  
(In millions; per-share amounts in dollars)
Diluted
  
Basic
  
Diluted
  
Basic
  
                         
Amounts attributable to the Company:
                        
Consolidated
                        
Earnings from continuing operations for
                        
per-share calculation
$
2,823
  
$
2,823
  
$
4,351
  
$
4,351
  
Preferred stock dividends declared
  
(75
)
  
(75
)
  
–
    
–
  
Earnings from continuing operations attributable to
                        
common shareowners for per-share calculation
$
2,748
  
$
2,748
  
$
4,351
  
$
4,351
  
Loss from discontinued operations
                        
for per-share calculation
  
(21
)
  
(21
)
  
(47
)
  
(47
)
Net earnings attributable to GE common
                        
shareowners for per-share calculation
  
2,727
    
2,727
    
4,304
    
4,304
  
                         
Average equivalent shares
                        
Shares of GE common stock outstanding
  
10,564
    
10,564
    
9,978
    
9,978
  
Employee compensation-related shares,
                        
including stock options
  
–
    
–
    
28
    
–
  
Total average equivalent shares
  
10,564
    
10,564
    
10,006
    
9,978
  
                         
Per-share amounts
                        
Earnings from continuing operations
$
0.26
  
$
0.26
  
$
0.43
  
$
0.44
  
Loss from discontinued operations
  
–
    
–
    
–
    
–
  
Net earnings
  
0.26
    
0.26
    
0.43
    
0.43
  
                         

On January 1, 2009, we adopted FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. Under the FSP, our unvested restricted stock unit awards that contain non-forfeitable rights to dividends or dividend equivalents are considered participating securities and, therefore, are included in the computation of earnings per share pursuant to the two-class method. Application of the standard had an insignificant effect.
(a)
At March 31, 2009, there were no potential shares included in our diluted EPS calculation because the effect would have been anti-dilutive. Further information about potential common shares is provided in Notes 23 and 24 of our 2008 Form 10-K.

 
Earnings-per-share amounts are computed independently for earnings from continuing operations, loss from discontinued operations and net earnings. As a result, the sum of per-share amounts from continuing operations and discontinued operations may not equal the total per-share amounts for net earnings.
 

 
(13)
 

8. INVESTMENT SECURITIES
 
The vast majority of our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations and holders of guaranteed investment contracts.
 
 
At
  
 
March 31, 2009
  
December 31, 2008
  
(In millions)
Amortized
cost
  
Gross
unrealized
gains
  
Gross
unrealized
losses
  
Estimated
fair value
  
Amortized
cost
  
Gross
unrealized
gains