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, 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 10,647,495,000 shares of common stock with a par value of $0.06 per share outstanding at September 25, 2009.

 
(1)

 


 
General Electric Company
 

 
   
Page
Part I - Financial Information
   
     
Item 1. Financial Statements
   
Condensed Statement of Earnings
   
 
3
 
4
 
5
 
6
 
7
 
8
 
51
 
75
 
75
     
Part II - Other Information
   
     
        Item 1. Legal Proceedings    75
 
77
 
77
 
78
 
79
 
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 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, including the impact of proposed financial services regulation; 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.
 
General Electric Company and consolidated affiliates
 
Condensed Statement of Earnings
 
 
Three months ended September 30, 2009 (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
(In millions; except share amounts)
2009 
 
2008 
   
2009 
 
2008 
 
2009 
 
2008 
                                     
Revenues
                                   
Sales of goods
$
 14,627 
 
$
 17,924 
   
$
 14,486 
 
$
 17,473 
 
$
 213 
 
$
 579 
Sales of services
 
 10,516 
   
 11,236 
     
 10,639 
   
 11,395 
   
– 
   
– 
Other income
 
 438 
   
 544 
     
 476 
   
 659 
   
– 
   
– 
GECS earnings from continuing operations
 
– 
   
– 
     
 133 
   
 2,010 
   
– 
   
– 
GECS revenues from services
 
 12,218 
   
 17,530 
     
– 
   
– 
   
 12,533 
   
 17,852 
   Total revenues
 
 37,799 
   
 47,234 
     
 25,734 
   
 31,537 
   
 12,746 
   
 18,431 
                                     
Costs and expenses
                                   
Cost of goods sold
 
 11,775 
   
 14,184 
     
 11,666 
   
 13,826 
   
 181 
   
 486 
Cost of services sold
 
 6,773 
   
 7,953 
     
 6,897 
   
 8,112 
   
– 
   
– 
Interest and other financial charges
 
 4,322 
   
 6,955 
     
 352 
   
 525 
   
 4,128 
   
 6,723 
Investment contracts, insurance losses and
                                   
   insurance annuity benefits
 
 732 
   
 787 
     
– 
   
– 
   
 785 
   
 839 
Provision for losses on financing receivables
 
 2,868 
   
 1,641 
     
– 
   
– 
   
 2,868 
   
 1,641 
Other costs and expenses
 
 9,354 
   
 10,542 
     
 3,714 
   
 3,541 
   
 5,781 
   
 7,093 
   Total costs and expenses
 
 35,824 
   
 42,062 
     
 22,629 
   
 26,004 
   
 13,743 
   
 16,782 
                                     
Earnings (loss) from continuing operations
                                   
   before income taxes
 
 1,975 
   
 5,172 
     
 3,105 
   
 5,533 
   
 (997)
   
 1,649 
Benefit (provision) for income taxes
 
 484 
   
 (539)
     
 (654)
   
 (996)
   
 1,138 
   
 457 
Earnings from continuing operations
 
 2,459 
   
 4,633 
     
 2,451 
   
 4,537 
   
 141 
   
 2,106 
Earnings (loss) from discontinued operations,
                                   
   net of taxes
 
 40 
   
 (165)
     
 40 
   
 (165)
   
 40 
   
 (170)
Net earnings
 
 2,499 
   
 4,468 
     
 2,491 
   
 4,372 
   
 181 
   
 1,936 
Less net earnings (loss) attributable to
                                   
   noncontrolling interests
 
 5 
   
 156 
     
 (3)
   
 60 
   
 8 
   
 96 
Net earnings attributable to the Company
 
 2,494 
   
 4,312 
     
 2,494 
   
 4,312 
   
 173 
   
 1,840 
Preferred stock dividends declared
 
 (75)
   
– 
     
 (75)
   
– 
   
– 
   
– 
Net earnings attributable to GE common
                                   
   shareowners
$
 2,419 
 
$
 4,312 
   
$
 2,419 
 
$
 4,312 
 
$
 173 
 
$
 1,840 
                                     
                                     
Amounts attributable to the Company
                                   
   Earnings from continuing operations
$
 2,454 
 
$
 4,477 
   
$
 2,454 
 
$
 4,477 
 
$
 133 
 
$
 2,010 
   Earnings (loss) from discontinued operations,
                                   
      net of taxes
 
 40 
   
 (165)
     
 40 
   
 (165)
   
 40 
   
 (170)
   Net earnings attributable to the Company
$
 2,494 
 
$
 4,312 
   
$
 2,494 
 
$
 4,312 
 
$
 173 
 
$
 1,840 
                                     
Per-share amounts
                                   
   Earnings from continuing operations
                                   
      Diluted earnings per share
$
 0.22 
 
$
 0.45 
                         
      Basic earnings per share
$
 0.22 
 
$
 0.45 
                         
                                     
   Net earnings
                                   
      Diluted earnings per share
$
 0.23 
 
$
 0.43 
                         
      Basic earnings per share
$
 0.23 
 
$
 0.43 
                         
                                     
Dividends declared per share
$
 0.10 
 
$
 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 Note 3 for other-than-temporary impairment amounts.
 
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)

 


General Electric Company and consolidated affiliates
 
Condensed Statement of Earnings
 
 
Nine months ended September 30, 2009 (Unaudited)
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
(In millions; except share amounts)
2009 
 
2008 
   
2009 
 
2008 
 
2009 
 
2008 
                                     
Revenues
                                   
Sales of goods
$
 44,605 
 
$
 50,092 
   
$
 44,000 
 
$
 48,876 
 
$
 691 
 
$
 1,474 
Sales of services
 
 30,743 
   
 31,489 
     
 31,159 
   
 32,024 
   
– 
   
– 
Other income
 
 900 
   
 1,693 
     
 1,035 
   
 1,984 
   
– 
   
– 
GECS earnings from continuing operations
 
– 
   
– 
     
 1,479 
   
 7,240 
   
– 
   
– 
GECS revenues from services
 
 39,097 
   
 53,028 
     
– 
   
– 
   
 39,969 
   
 54,027 
   Total revenues
 
 115,345 
   
 136,302 
     
 77,673 
   
 90,124 
   
 40,660 
   
 55,501 
                                     
Costs and expenses
                                   
Cost of goods sold
 
 35,658 
   
 39,977 
     
 35,175 
   
 38,971 
   
 569 
   
 1,264 
Cost of services sold
 
 19,760 
   
 20,882 
     
 20,177 
   
 21,417 
   
– 
   
– 
Interest and other financial charges
 
 14,302 
   
 20,103 
     
 1,076 
   
 1,681 
   
 13,717 
   
 19,242 
Investment contracts, insurance losses and
                                   
   insurance annuity benefits
 
 2,257 
   
 2,412 
     
– 
   
– 
   
 2,381 
   
 2,557 
Provision for losses on financing receivables
 
 8,021 
   
 4,453 
     
– 
   
– 
   
 8,021 
   
 4,453 
Other costs and expenses
 
 27,624 
   
 31,317 
     
 10,634 
   
 10,780 
   
 17,381 
   
 20,862 
   Total costs and expenses
 
 107,622 
   
 119,144 
     
 67,062 
   
 72,849 
   
 42,069 
   
 48,378 
                                     
Earnings (loss) from continuing operations
                                   
   before income taxes
 
 7,723 
   
 17,158 
     
 10,611 
   
 17,275 
   
 (1,409)
   
 7,123 
Benefit (provision) for income taxes
 
 566 
   
 (2,434)
     
 (2,393)
   
 (2,735)
   
 2,959 
   
 301 
Earnings from continuing operations
 
 8,289 
   
 14,724 
     
 8,218 
   
 14,540 
   
 1,550 
   
 7,424 
Loss from discontinued operations, net of taxes
 
 (175)
   
 (534)
     
 (175)
   
 (534)
   
 (157)
   
 (568)
Net earnings
 
 8,114 
   
 14,190 
     
 8,043 
   
 14,006 
   
 1,393 
   
 6,856 
Less net earnings attributable to noncontrolling interests
 
 102 
   
 502 
     
 31 
   
 318 
   
 71 
   
 184 
Net earnings attributable to the Company
 
 8,012 
   
 13,688 
     
 8,012 
   
 13,688 
   
 1,322 
   
 6,672 
Preferred stock dividends declared
 
 (225)
   
– 
     
 (225)
   
– 
   
– 
   
– 
Net earnings attributable to GE common
                                   
   shareowners
$
 7,787 
 
$
 13,688 
   
$
 7,787 
 
$
 13,688 
 
$
 1,322 
 
$
 6,672 
                                     
                                     
Amounts attributable to the Company
                                   
   Earnings from continuing operations
$
 8,187 
 
$
 14,222 
   
$
 8,187 
 
$
 14,222 
 
$
 1,479 
 
$
 7,240 
   Loss from discontinued operations, net of taxes
 
 (175)
   
 (534)
     
 (175)
   
 (534)
   
 (157)
   
 (568)
   Net earnings attributable to the Company
$
 8,012 
 
$
 13,688 
   
$
 8,012 
 
$
 13,688 
 
$
 1,322 
 
$
 6,672 
                                     
Per-share amounts
                                   
   Earnings from continuing operations
                                   
      Diluted earnings per share
$
 0.75 
 
$
 1.42 
                         
      Basic earnings per share
$
 0.75 
 
$
 1.43 
                         
                                     
   Net earnings
                                   
      Diluted earnings per share
$
 0.73 
 
$
 1.37 
                         
      Basic earnings per share
$
 0.73 
 
$
 1.37 
                         
                                     
Dividends declared per share
$
 0.51 
 
$
 0.93 
                         
                                     

(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 Note 3 for other-than-temporary impairment amounts.
 
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)

 

General Electric Company and consolidated affiliates
 
Condensed Statement of Financial Position
 
 
Consolidated
   
GE(a)
 
Financial Services (GECS)
 
September 30,
 
December 31,
   
September 30,
 
December 31,
 
September 30,
 
December 31,
(In millions; except share amounts)
2009 
 
2008 
   
2009 
 
2008 
 
2009 
 
2008 
 
(Unaudited)
       
(Unaudited)
     
(Unaudited)
   
Assets
                                   
Cash and equivalents
$
 61,374 
 
$
 48,187 
   
$
 5,207 
 
$
 12,090 
 
$
 56,898 
 
$
 37,486 
Investment securities
 
 52,761 
   
 41,446 
     
 40 
   
 213 
   
 52,723 
   
 41,236 
Current receivables
 
 19,613 
   
 21,411 
     
 12,872 
   
 15,064 
   
– 
   
– 
Inventories
 
 13,092 
   
 13,674 
     
 13,013 
   
 13,597 
   
 79 
   
 77 
Financing receivables – net
 
 340,688 
   
 365,168 
     
– 
   
– 
   
 348,518 
   
 372,456 
Other GECS receivables
 
 14,339 
   
 13,439 
     
– 
   
– 
   
 18,625 
   
 18,636 
Property, plant and equipment (including
                                   
   equipment leased to others) – net
 
 72,993 
   
 78,530 
     
 14,281 
   
 14,433 
   
 58,712 
   
 64,097 
Investment in GECS
 
– 
   
– 
     
 70,658 
   
 53,279 
   
– 
   
– 
Goodwill
 
 84,880 
   
 81,759 
     
 56,696 
   
 56,394 
   
 28,184 
   
 25,365 
Other intangible assets – net
 
 15,010 
   
 14,977 
     
 11,172 
   
 11,364 
   
 3,838 
   
 3,613 
All other assets
 
 110,235 
   
 106,899 
     
 23,787 
   
 22,435 
   
 87,941 
   
 85,721 
Assets of businesses held for sale
 
 1,263 
   
 10,556 
     
– 
   
– 
   
 1,263 
   
 10,556 
Assets of discontinued operations
 
 1,598 
   
 1,723 
     
 65 
   
 64 
   
 1,533 
   
 1,659 
Total assets
$
 787,846 
 
$
 797,769 
   
$
 207,791 
 
$
 198,933 
 
$
 658,314 
 
$
 660,902 
                                     
Liabilities and equity
                                   
Short-term borrowings
$
 160,115 
 
$
 193,695 
   
$
 565 
 
$
 2,375 
 
$
 160,938 
 
$
 193,533 
Accounts payable, principally trade accounts
 
 18,931 
   
 20,819 
     
 10,391 
   
 11,699 
   
 12,501 
   
 13,882 
Progress collections and price adjustments
                                   
   accrued
 
 12,511 
   
 12,536 
     
 13,232 
   
 13,058 
   
– 
   
– 
Other GE current liabilities
 
 19,229 
   
 21,560 
     
 19,229 
   
 21,624 
   
– 
   
– 
Long-term borrowings
 
 358,092 
   
 330,067 
     
 11,683 
   
 9,827 
   
 347,415 
   
 321,068 
Investment contracts, insurance liabilities
                                   
   and insurance annuity benefits
 
 32,549 
   
 34,032 
     
– 
   
– 
   
 32,948 
   
 34,369 
All other liabilities
 
 53,708 
   
 64,796 
     
 32,813 
   
 32,767 
   
 21,021 
   
 32,090 
Deferred income taxes
 
 5,308 
   
 4,584 
     
 (4,126)
   
 (3,949)
   
 9,434 
   
 8,533 
Liabilities of businesses held for sale
 
 143 
   
 636 
     
– 
   
– 
   
 143 
   
 636 
Liabilities of discontinued operations
 
 1,451 
   
 1,432 
     
 172 
   
 189 
   
 1,279 
   
 1,243 
Total liabilities
 
 662,037 
   
 684,157 
     
 83,959 
   
 87,590 
   
 585,679 
   
 605,354 
                                     
Preferred stock (30,000 shares outstanding at
                                   
   both September 30, 2009 and December 31, 2008)
 
– 
   
– 
     
– 
   
– 
   
– 
   
– 
Common stock (10,647,495,000 and 10,536,897,000
                                   
   shares outstanding at September 30, 2009 and
                                   
   December 31, 2008, respectively)
 
 702 
   
 702 
     
 702 
   
 702 
   
 1 
   
 1 
Accumulated other comprehensive income – net(b)
                                   
   Investment securities
 
 (479)
   
 (3,094)
     
 (479)
   
 (3,094)
   
 (478)
   
 (3,097)
   Currency translation adjustments
 
 4,043 
   
 (299)
     
 4,043 
   
 (299)
   
 1,409 
   
 (1,258)
   Cash flow hedges
 
 (1,856)
   
 (3,332)
     
 (1,856)
   
 (3,332)
   
 (1,894)
   
 (3,134)
   Benefit plans
 
 (14,469)
   
 (15,128)
     
 (14,469)
   
 (15,128)
   
 (374)
   
 (367)
Other capital
 
 37,861 
   
 40,390 
     
 37,861 
   
 40,390 
   
 27,578 
   
 18,079 
Retained earnings
 
 124,530 
   
 122,123 
     
 124,530 
   
 122,123 
   
 44,416 
   
 43,055 
Less common stock held in treasury
 
 (32,803)
   
 (36,697)
     
 (32,803)
   
 (36,697)
   
– 
   
– 
                                     
Total GE shareowners’ equity
 
 117,529 
   
 104,665 
     
 117,529 
   
 104,665 
   
 70,658 
   
 53,279 
Noncontrolling interests(c)
 
 8,280 
   
 8,947 
     
 6,303 
   
 6,678 
   
 1,977 
   
 2,269 
Total equity
 
 125,809 
   
 113,612 
     
 123,832 
   
 111,343 
   
 72,635 
   
 55,548 
                                     
Total liabilities and equity
$
 787,846 
 
$
 797,769 
   
$
 207,791 
 
$
 198,933 
 
$
 658,314 
 
$
 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 $(12,761) million and $(21,853) million at September 30, 2009 and December 31, 2008, respectively.
 
(c)
Included accumulated other comprehensive income attributable to noncontrolling interests of $(83) million and $(194) million at September 30, 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.
 

 
(5)

 

General Electric Company and consolidated affiliates
 
Condensed Statement of Cash Flows
 
 
Nine months ended September 30 (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
$
 8,012 
 
$
 13,688 
   
$
 8,012 
 
$
 13,688 
 
$
 1,322 
 
$
 6,672 
Loss from discontinued operations
 
 175 
   
 534 
     
 175 
   
 534 
   
 157 
   
 568 
Adjustments to reconcile net earnings attributable to the
                                   
   Company to cash provided from operating activities
                                   
      Depreciation and amortization of property,
                                   
         plant and equipment
 
 7,893 
   
 8,216 
     
 1,696 
   
 1,587 
   
 6,197 
   
 6,629 
      Earnings from continuing operations retained
                                   
         by GECS
 
– 
   
– 
     
 (1,479)
   
 (4,949)
   
– 
   
– 
      Deferred income taxes
 
 281 
   
 1,798 
     
 (179)
   
 (454)
   
 460 
   
 2,252 
      Decrease (increase) in GE current receivables
 
 2,181 
   
 (1,344)
     
 2,330 
   
 41 
   
– 
   
– 
      Decrease (increase) in inventories
 
 350 
   
 (1,765)
     
 412 
   
 (1,624)
   
 (2)
   
 (10)
      Increase (decrease) in accounts payable
 
 (1,355)
   
 (411)
     
 (869)
   
 444 
   
 (1,288)
   
 (669)
      Increase (decrease) in GE progress collections
 
 (194)
   
 3,103 
     
 5 
   
 3,241 
   
– 
   
– 
      Provision for losses on GECS financing receivables
 
 8,021 
   
 4,453 
     
– 
   
– 
   
 8,021 
   
 4,453 
      All other operating activities
 
 (11,351)
   
 (468)
     
 1,362 
   
 1,127 
   
 (12,898)
   
 (1,751)
Cash from (used for) operating activities – continuing
                                   
   operations
 
 14,013 
   
 27,804 
     
 11,465 
   
 13,635 
   
 1,969 
   
 18,144 
Cash from (used for) operating activities – discontinued
                                   
   operations
 
 (62)
   
 497 
     
 (2)
   
 (9)
   
 (60)
   
 506 
Cash from (used for) operating activities
 
 13,951 
   
 28,301 
     
 11,463 
   
 13,626 
   
 1,909 
   
 18,650 
                                     
Cash flows – investing activities
                                   
Additions to property, plant and equipment
 
 (5,808)
   
 (11,484)
     
 (1,770)
   
 (2,263)
   
 (4,231)
   
 (9,468)
Dispositions of property, plant and equipment
 
 3,689 
   
 7,286 
     
– 
   
– 
   
 3,689 
   
 7,286 
Net decrease (increase) in GECS financing receivables
 
 37,117 
   
 (26,898)
     
– 
   
– 
   
 36,953 
   
 (28,359)
Proceeds from sales of discontinued operations
 
– 
   
 5,423 
     
– 
   
 203 
   
– 
   
 5,220 
Proceeds from principal business dispositions
 
 9,676 
   
 4,480 
     
 858 
   
 58 
   
 8,818 
   
 4,422 
Payments for principal businesses purchased
 
 (5,994)
   
 (27,042)
     
 (357)
   
 (2,053)
   
 (5,637)
   
 (24,989)
Capital contribution from GE to GECS
 
– 
   
– 
     
 (9,500)
   
– 
   
– 
   
– 
All other investing activities
 
 (3,938)
   
 (3,283)
     
 (2)
   
 (56)
   
 (3,012)
   
 (2,948)
Cash from (used for) investing activities – continuing
                                   
   operations
 
 34,742 
   
 (51,518)
     
 (10,771)
   
 (4,111)
   
 36,580 
   
 (48,836)
Cash from (used for) investing activities – discontinued
                                   
   operations
 
 66 
   
 (616)
     
 2 
   
 9 
   
 64 
   
 (625)
Cash from (used for) investing activities
 
 34,808 
   
 (52,134)
     
 (10,769)
   
 (4,102)
   
 36,644 
   
 (49,461)
                                     
Cash flows – financing activities
                                   
Net increase (decrease) in borrowings (maturities of
                                   
   90 days or less)
 
 (32,788)
   
 (18,298)
     
 (12)
   
 (1,719)
   
 (33,600)
   
 (16,949)
Newly issued debt (maturities longer than 90 days)
 
 73,898 
   
 99,373 
     
 1,825 
   
 122 
   
 72,251 
   
 99,228 
Repayments and other reductions (maturities longer
                                   
   than 90 days)
 
 (67,007)
   
 (45,055)
     
 (1,598)
   
 (145)
   
 (65,409)
   
 (44,910)
Net dispositions (purchases) of GE shares for treasury
 
 498 
   
 (1,678)
     
 498 
   
 (1,678)
   
– 
   
– 
Dividends paid to shareowners
 
 (7,845)
   
 (9,308)
     
 (7,845)
   
 (9,308)
   
– 
   
 (2,291)
Capital contribution from GE to GECS
 
– 
   
– 
     
– 
   
– 
   
 9,500 
   
– 
All other financing activities
 
 (2,324)
   
 (750)
     
 (445)
   
– 
   
 (1,879)
   
 (750)
Cash from (used for) financing activities – continuing
                                   
   operations
 
 (35,568)
   
 24,284 
     
 (7,577)
   
 (12,728)
   
 (19,137)
   
 34,328 
Cash from (used for) financing activities – discontinued
                                   
   operations
 
– 
   
 (4)
     
– 
   
– 
   
– 
   
 (4)
Cash from (used for) financing activities
 
 (35,568)
   
 24,280 
     
 (7,577)
   
 (12,728)
   
 (19,137)
   
 34,324 
Increase (decrease) in cash and equivalents
 
 13,191 
   
 447 
     
 (6,883)
   
 (3,204)
   
 19,416 
   
 3,513 
Cash and equivalents at beginning of year
 
 48,367 
   
 16,031 
     
 12,090 
   
 6,702 
   
 37,666 
   
 9,739 
Cash and equivalents at September 30
 
 61,558 
   
 16,478 
     
 5,207 
   
 3,498 
   
 57,082 
   
 13,252 
Less cash and equivalents of discontinued operations
                                   
   at September 30
 
 184 
   
 177 
     
– 
   
– 
   
 184 
   
 177 
Cash and equivalents of continuing operations
                                   
   at September 30
$
 61,374 
 
$
 16,301 
   
$
 5,207 
 
$
 3,498 
 
$
 56,898 
 
$
 13,075 
                                     

(a)
Represents the adding together of all affiliated companies except General Electric Capital Services, Inc. (GECS or financial services) which is presented on a one-line basis.
 
See accompanying notes. Separate information is shown for "GE" and "Financial Services (GECS)." Transactions between GE and GECS have been eliminated from the "Consolidated" columns and are discussed in Note 17.
 

 
(6)

 

Summary of Operating Segments
General Electric Company and consolidated affiliates
 
 
Three months ended September 30
 
Nine months ended September 30
 
(Unaudited)
 
(Unaudited)
(In millions)
2009 
 
2008 
 
2009 
 
2008 
                       
Revenues
                     
   Energy Infrastructure
$
 8,917 
 
$
 9,769 
 
$
 26,733 
 
$
 27,164 
   Technology Infrastructure
 
 10,209 
   
 11,450 
   
 31,200 
   
 33,761 
   NBC Universal
 
 4,079 
   
 5,073 
   
 11,168 
   
 12,539 
   Capital Finance
 
 12,161 
   
 17,292 
   
 38,100 
   
 52,242 
   Consumer & Industrial
 
 2,438 
   
 2,989 
   
 7,166 
   
 8,990 
      Total segment revenues
 
 37,804 
   
 46,573 
   
 114,367 
   
 134,696 
Corporate items and eliminations
 
 (5)
   
 661 
   
 978 
   
 1,606 
Consolidated revenues
$
 37,799 
 
$
 47,234 
 
$
 115,345 
 
$
 136,302 
                       
Segment profit(a)
                     
   Energy Infrastructure
$
 1,582 
 
$
 1,425 
 
$
 4,646 
 
$
 4,074 
   Technology Infrastructure
 
 1,748 
   
 1,900 
   
 5,384 
   
 5,657 
   NBC Universal
 
 732 
   
 645 
   
 1,662 
   
 2,266 
   Capital Finance
 
 263 
   
 2,020 
   
 2,008 
   
 7,602 
   Consumer & Industrial
 
 117 
   
 47 
   
 264 
   
 329 
      Total segment profit
 
 4,442 
   
 6,037 
   
 13,964 
   
 19,928 
Corporate items and eliminations
 
 (982)
   
 (39)
   
 (2,308)
   
 (1,290)
GE interest and other financial charges
 
 (352)
   
 (525)
   
 (1,076)
   
 (1,681)
GE provision for income taxes
 
 (654)
   
 (996)
   
 (2,393)
   
 (2,735)
Earnings from continuing operations attributable
                     
  to the Company
 
 2,454 
   
 4,477 
   
 8,187 
   
 14,222 
Earnings (loss) from discontinued operations,
                     
  net of taxes, attributable to the Company
 
 40 
   
 (165)
   
 (175)
   
 (534)
Consolidated net earnings attributable to
                     
   the Company
$
 2,494 
 
$
 4,312 
 
$
 8,012 
 
$
 13,688 
                       

(a)
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations, earnings attributable to noncontrolling interests of consolidated subsidiaries 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.
     

 
(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 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
 
The Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Codification (ASC) effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC is an aggregation of previously issued authoritative U.S. generally accepted accounting principles (GAAP) in one comprehensive set of guidance organized by subject area. In accordance with the ASC, references to previously issued accounting standards have been replaced by ASC references. Subsequent revisions to GAAP will be incorporated into the ASC through Accounting Standards Updates (ASU).
 
We adopted FASB ASC 820, Fair Value Measurements and Disclosures, in two steps; effective January 1, 2008, we adopted it for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis and effective January 1, 2009, for all non-financial instruments accounted for at fair value on a non-recurring basis. This guidance establishes a new framework for measuring fair value and expands related disclosures. See Note 14.
 
On January 1, 2009, we adopted an amendment to FASB ASC 805, Business Combinations. This amendment significantly changed 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.
 

 
(8)

 

In April 2009, the FASB amended FASB ASC 805 and changed the previous accounting for assets and liabilities arising from contingencies in a business combination. We adopted this amendment retrospectively effective January 1, 2009. The amendment requires pre-acquisition contingencies to be recognized at fair value, if fair value can be determined or reasonably estimated during the measurement period. If fair value cannot be determined or reasonably estimated, the standard requires measurement based on the recognition and measurement criteria of FASB ASC 450, Contingencies.
 
On January 1, 2009, we adopted an amendment to FASB ASC 810, Consolidation, which requires us to make certain changes to the presentation of our financial statements. This amendment requires us to classify noncontrolling interests (previously referred to as “minority interest”) as part of consolidated net earnings ($5 million and $156 million for the three months ended September 30, 2009 and 2008, respectively, and $102 million and $502 million for the nine months ended September 30, 2009 and 2008, respectively) and to include the accumulated amount of noncontrolling interests as part of shareowners' equity ($8,280 million and $8,947 million at September 30, 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, 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. Beginning January 1, 2009, dividends to noncontrolling interests are classified as financing cash flows. In addition to these financial reporting changes, this guidance 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 FASB ASC 808, 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.
 
Effective April 1, 2009, the FASB amended ASC 820 in relation to determining fair value when the volume and level of activity for an asset or liability have significantly decreased and identifying transactions that are not orderly. Adoption of this amendment had an insignificant effect on our financial statements.
 
Effective April 1, 2009, the FASB amended ASC 320, Investments – Debt and Equity Securities. See Note 3. This amendment modified the existing model for recognition and measurement of impairment for debt securities. The two principal changes to the impairment model for securities are as follows:
 
·  
Recognition of an other-than-temporary impairment charge for debt securities is required if any of these conditions are met: (1) we do not expect to recover the entire amortized cost basis of the security, (2) we intend to sell the security or (3) it is more likely than not that we will be required to sell the security before we recover its amortized cost basis.
 
·  
If the first condition above is met, but we do not intend to sell and it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis, we would be required to record the difference between the security’s amortized cost basis and its recoverable amount in earnings and the difference between the security’s recoverable amount and fair value in other comprehensive income. If either the second or third criteria are met, then we would be required to recognize the entire difference between the security’s amortized cost basis and its fair value in earnings.
 

 
(9)

 

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. We have evaluated subsequent events that have occurred through November 2, 2009, the date of financial statement issuance. 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.
 
2. DISCONTINUED OPERATIONS
 
Discontinued operations comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment 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.
 
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 investment 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 $3,000 million. During the second quarter of 2009, we accrued $132 million, which represents the amount by which we expect claims to exceed those levels and is based on our historical and recent claims experience and the estimated future requests, taking into consideration the ability and likelihood of customers to make claims and other industry risk factors. 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 will continue to review our estimated exposure quarterly, and make adjustments when required. GE Money Japan revenues from discontinued operations were an insignificant amount and $209 million in the third quarters of 2009 and 2008, respectively, and an insignificant amount and $760 million in the first nine months of 2009 and 2008, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $10 million and $160 million in the third quarters of 2009 and 2008, respectively, and $142 million and $508 million in the first nine months of 2009 and 2008, respectively.
 

 
(10)

 

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 $212 million at September 30, 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 $4 million and $(7) million in the third quarters of 2009 and 2008, respectively, and $(5) million and $(64) million in the first nine months of 2009 and 2008, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $3 million and $(8) million in the third quarters of 2009 and 2008, respectively, and $(8) million and $(35) million in the first nine months of 2009 and 2008, respectively.
 
GE industrial earnings (loss) from discontinued operations, net of taxes, were an insignificant amount and $5 million in the third quarters of 2009 and 2008, respectively, and $(18) million and $34 million in the first nine months of 2009 and 2008, respectively.
 
Assets of GE industrial discontinued operations were $65 million and $64 million at September 30, 2009 and December 31, 2008, respectively. Liabilities of GE industrial discontinued operations were $172 million and $189 million at September 30, 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 September 30
 
Nine months ended September 30
(In millions)
2009 
 
2008 
 
2009 
 
2008 
                       
Operations
                     
Total revenues
$
 4 
 
$
 202 
 
$
 (4)
 
$
 696 
                       
Earnings (loss) from discontinued operations
                     
   before income taxes
$
 11 
 
$
 (207)
 
$
 (102)
 
$
 (516)
Income tax benefit (expense)
 
 (16)
   
 50 
   
 27 
   
 193 
Loss from discontinued operations,
                     
   net of taxes
$
 (5)
 
$
 (157)
 
$
 (75)
 
$
 (323)
                       
Disposal
                     
Loss on disposal before income taxes
$
 (53)
 
$
 (1,277)
 
$
 (176)
 
$
 (1,499)
Income tax benefit
 
 98 
   
 1,264 
   
 94 
   
 1,254 
Earnings (loss) on disposal, net of taxes
$
 45 
 
$
 (13)
 
$
 (82)
 
$
 (245)
                       
Earnings (loss) from discontinued operations,
                     
   net of taxes(a)
$
 40 
 
$
 (170)
 
$
 (157)
 
$
 (568)
                       

(a)
The sum of GE industrial earnings (loss) from discontinued operations, net of taxes, and GECS earnings (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.
 
  


 
(11)

 


 
At
 
September 30,
 
December 31,
(In millions)
2009 
 
2008 
           
Assets
         
Cash and equivalents
$
 184 
 
$
 180 
All other assets
 
 13 
   
 19 
Other
 
 1,336 
   
 1,460 
Assets of discontinued operations
$
 1,533 
 
$
 1,659 
           
           
 
At
 
September 30,
 
December 31,
(In millions)
2009 
 
2008 
           
Liabilities
         
Liabilities of discontinued operations
$
 1,279 
 
$
 1,243 

 
Assets at September 30, 2009 and December 31, 2008, primarily comprised a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business.
 

 
(12)

 

3. 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
 
September 30, 2009
 
December 31, 2008
     
Gross
 
Gross
         
Gross
 
Gross
   
 
Amortized
 
unrealized
 
unrealized
 
Estimated
 
Amortized
 
unrealized
 
unrealized
 
Estimated
(In millions)
cost
 
gains
 
losses
 
fair value
 
cost
 
gains
 
losses
 
fair value
                                               
GE
                                             
   Debt – U.S. corporate
$
25 
 
$
– 
 
$
– 
 
$
25 
 
$
182 
 
$
– 
 
$
– 
 
$
182 
   Equity – available-for-sale
 
15 
   
   
(1)
   
15 
   
32 
   
– 
   
(1)
   
31 
   
40 
   
   
(1)
   
40 
   
214 
   
– 
   
(1)
   
213 
GECS
                                             
   Debt
                                             
      U.S. corporate
 
22,909 
   
1,435 
   
(957)
   
23,387 
   
22,183 
   
512 
   
(2,477)
   
20,218 
      State and municipal
 
2,281 
   
71 
   
(218)
   
2,134 
   
1,556 
   
19 
   
(94)
   
1,481 
      Residential mortgage-
                                             
         backed(a)
 
4,223 
   
96 
   
(882)
   
3,437 
   
5,326 
   
70 
   
(1,052)
   
4,344 
      Commercial mortgage-backed
 
3,001 
   
83 
   
(541)
   
2,543 
   
2,910 
   
14 
   
(788)
   
2,136 
      Asset-backed
 
3,029 
   
42 
   
(339)
   
2,732 
   
3,173 
   
   
(691)
   
2,485 
      Corporate – non-U.S.
 
1,703 
   
63 
   
(53)
   
1,713 
   
1,441 
   
14 
   
(166)
   
1,289 
      Government – non-U.S.
 
3,321 
   
61 
   
(12)
   
3,370 
   
1,300 
   
61 
   
(19)
   
1,342 
      U.S. government and federal
                                             
         agency
 
3,492 
   
66 
   
– 
   
3,558 
   
739 
   
65 
   
(100)
   
704 
   Retained interests(b)(c)
 
8,245 
   
248 
   
(75)
   
8,418 
   
6,395 
   
113 
   
(152)
   
6,356 
   Equity
                                             
      Available-for-sale
 
588 
   
198 
   
(14)
   
772 
   
629 
   
24 
   
(160)
   
493 
      Trading
 
659 
   
– 
   
– 
   
659 
   
388 
   
– 
   
– 
   
388 
   
53,451 
   
2,363 
   
(3,091)
   
52,723 
   
46,040 
   
895 
   
(5,699)
   
41,236 
Eliminations
 
(2)
   
– 
   
– 
   
(2)
   
(7)
   
– 
   
   
(3)
Total
$
53,489 
 
$
2,364 
 
$
(3,092)
 
$
52,761 
 
$
46,247 
 
$
895 
 
$
(5,696)
 
$
41,446 
                                               

Substantially collateralized by U.S. mortgages.
 
(b)
Included $1,846 million and $1,752 million of retained interests at September 30, 2009 and December 31, 2008, respectively, accounted for at fair value in accordance with FASB ASC 815, Derivatives and Hedging. See Note 16.
 
(c)
Amortized cost and estimated fair value included $23 million and $20 million of trading securities at September 30, 2009 and December 31, 2008, respectively.
 

 

 
(13)

 

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.
 
 
In loss position for
 
Less than 12 months
 
12 months or more
     
Gross
     
Gross
 
Estimated
unrealized
Estimated
unrealized
(In millions)
fair value
losses
fair value
losses
                       
September 30, 2009
                     
Debt
                     
   U.S. corporate
$
 1,779 
 
$
 (60)
 
$
 5,276 
 
$
 (897)
   State and municipal
 
 388 
   
 (120)
   
 512 
   
 (98)
   Residential mortgage-backed
 
 211 
   
 (23)
   
 1,753 
   
 (859)
   Commercial mortgage-backed
 
 10 
   
 (2)
   
 1,362 
   
 (539)
   Asset-backed
 
 96 
   
 (4)
   
 1,427 
   
 (335)
   Corporate – non-U.S.
 
 248 
   
 (13)
   
 521 
   
 (40)
   Government – non-U.S.
 
 1,078 
   
 (7)
   
 254 
   
 (5)
   U.S. government and federal agency
 
– 
   
– 
   
– 
   
– 
Retained interests
 
 442 
   
 (28)
   
 108 
   
 (47)
Equity
 
 128 
   
 (9)
   
 32 
   
 (6)
Total
$
 4,380 
 
$
 (266)
 
$
 11,245 
 
$
 (2,826)
                       
December 31, 2008
                     
Debt
                     
   U.S. corporate
$
 6,602 
 
$
 (1,108)
 
$
 5,629 
 
$
 (1,369)
   State and municipal
 
 570 
   
 (44)
   
 278 
   
 (50)
   Residential mortgage-backed
 
 1,355 
   
 (107)
   
 1,614 
   
 (945)
   Commercial mortgage-backed
 
 774 
   
 (184)
   
 1,218 
   
 (604)
   Asset-backed
 
 1,064 
   
 (419)
   
 1,063 
   
 (272)
   Corporate – non-U.S.
 
 454 
   
 (106)
   
 335 
   
 (60)
   Government – non-U.S.
 
 88 
   
 (4)
   
 275 
   
 (15)
   U.S. government and federal agency
 
– 
   
– 
   
 150 
   
 (100)
Retained interests
 
 1,403 
   
 (71)
   
 274 
   
 (81)
Equity
 
 268 
   
 (153)
   
 9 
   
 (4)
Total
$
 12,578 
 
$
 (2,196)
 
$
 10,845 
 
$
 (3,500)

 
We adopted amendments to FASB ASC 320 and recorded a cumulative effect adjustment to increase retained earnings as of April 1, 2009 of $62 million.
 
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future.
 
The vast majority of our U.S. corporate debt securities are rated investment grade by the major rating agencies. We evaluate U.S. corporate debt securities based on a variety of factors such as the financial health of and specific prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. In the event a U.S. corporate debt security is deemed to be other-than-temporarily impaired, we isolate the credit portion of the impairment by comparing the present value of our expectation of cash flows to the amortized cost of the security. We discount the cash flows using the original effective interest rate of the security.
 

 
(14)

 

The vast majority of our residential mortgage-backed securities (RMBS) have investment-grade credit ratings from the major rating agencies and are in a senior position in the capital structure of the deal. Of our total RMBS at September 30, 2009 and December 31, 2008, approximately $984 million and $1,310 million, respectively, relate to residential subprime credit, primarily supporting our guaranteed investment contracts. These are collateralized primarily by pools of individual, direct mortgage loans (a majority of which were originated in 2006 and 2005), not other structured products such as collateralized debt obligations. In addition, of the total residential subprime credit exposure at September 30, 2009 and December 31, 2008, approximately $840 million and $1,093 million, respectively, was insured by monoline insurers.
 
Substantially all of our commercial mortgage-backed securities (CMBS) also have investment-grade credit ratings from the major rating agencies and are in a senior position in the capital structure of the deal. Our CMBS investments are collateralized by both diversified pools of mortgages that were originated for securitization (conduit CMBS) and pools of large loans backed by high quality properties (large loan CMBS), a majority of which were originated in 2006 and 2007.
 
For asset-backed securities, including RMBS, we estimate the portion of loss attributable to credit using a discounted cash flow model that considers estimates of cash flows generated from the underlying collateral. Estimates of cash flows consider internal credit risk, interest rate and prepayment assumptions that incorporate management’s best estimate of key assumptions, including default rates, loss severity and prepayment rates. For CMBS, we estimate the portion of loss attributable to credit by evaluating potential losses on each of the underlying loans in the security. Collateral cash flows are considered in the context of our position in the capital structure of the deal. Assumptions can vary widely depending upon the collateral type, geographic concentrations and vintage.
 
If there has been an adverse change in cash flows for RMBS, management considers credit enhancements such as monoline insurance (which are features of a specific security). In evaluating the overall credit worthiness of the Monoline, we use an analysis that is similar to the approach we use for corporate bonds, including an evaluation of the sufficiency of the Monoline’s cash reserves and capital, ratings activity, whether the Monoline is in default or default appears imminent, and the potential for intervention by an insurance or other regulator.
 
During the three months ended September 30, 2009, we recorded pre-tax, other-than-temporary impairments of $325 million, of which $161 million was recorded through earnings ($26 million relates to equity securities), and $164 million was recorded in Accumulated Other Comprehensive Income (AOCI).
 
Previously recognized other-than-temporary impairments related to credit on securities still held at July 1, 2009 were $499 million. During the third quarter, first time and incremental credit impairments were $48 million and $55 million, respectively. Previous credit impairments related to securities sold were $82 million.
 
During the period April 1, 2009 through September 30, 2009, we recorded pre-tax, other-than-temporary impairments of $624 million, of which $359 million was recorded through earnings ($38 million relates to equity securities), and $265 million was recorded in AOCI.
 
Previously recognized other-than-temporary impairments related to credit on securities still held at April 1, 2009 were $324 million. During the period April 1, 2009 through September 30, 2009, first time and incremental credit impairments were $74 million and $204 million, respectively. Previous credit impairments related to securities sold were $82 million.
 

 
(15)

 

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.
 
 
Three months ended September 30
 
Nine months ended September 30
(In millions)
2009 
 
2008 
 
2009 
 
2008 
                       
GE
                     
Gains
$
– 
 
$
– 
 
$
– 
 
$
– 
Losses, including impairments
 
– 
   
– 
   
 (172)
   
 (6)
   Net
 
– 
   
– 
   
 (172)
   
 (6)
                       
GECS
                     
Gains
 
 55 
   
 26 
   
 114 
   
 180 
Losses, including impairments
 
 (186)
   
 (310)
   
 (534)
   
 (610)
   Net
 
 (131)
   
 (284)
   
 (420)
   
 (430)
Total
$
 (131)
 
$
 (284)
 
$
 (592)
 
$
 (436)

 
Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders.
 
Proceeds from investment securities sales and early redemptions by the issuer totaled $3,786 million and $934 million in the third quarters of 2009 and 2008, respectively, and $7,418 million and $2,949 million in the first nine months of 2009 and 2008, respectively, principally from the sales and maturities of short-term securities in our bank subsidiaries.